Mortgage Rates Changed Direction

Mortgage rates are going up instead of going down, a trend that's likely to continue as the Bank of Canada shifts its focus from stimulating the economy to taming inflation.

A five-year fixed mortgage now cost half a percentage point more than it did on Wednesday.

This means the average bank customer will pay a discounted rate of about 6.09 per cent for a five-year fixed term, compared with Wednesday's 5.59 per cent.

The move came sooner than some industry watchers had expected, and was driven largely by a spike in five-year bond yields caused by concerns about the rising cost of living.

Bond yields, on which fixed mortgage rates are based, rose sharply after the Bank of Canada surprised the markets with the announcement that it would freeze, rather than cut, its key lending rate.

The increase in mortgage rates comes at the same time the housing market is softening, with sales dropping and a glut of listings flooding the market in a number of cities.

A Statistics Canada study showed Canadians are finding themselves with two mortgages and deeper in debt than at any time in their lives. They are increasingly house poor, and with housing values sliding, they often owe more on their properties than they're worth.

About 17 per cent of all Canadian households have at least one mortgage, the highest percentage since 1981. The number of Canadians aged 60 and over with mortgages has been increasing since 2001.

And with the Bank of Canada poised for perhaps only one more interest rate cut before they start increasing rates in late fall to combat inflation, Canadians facing rising variable mortgage rates or fixed rates that will be reset at higher levels could find it tough to keep their homes.

If you are considering a home purchase or refinancing then go to my website www.joemalek.com to lock in your rate up to 120 days to protect yourself from further rate increases.

Thank you

Joe Malek, AMP
Accredited Mortgage Professional