Bank of Canada increased the overnight rate from 3.25% to 3.75%

As inflation remains at some of the highest levels, rates are potentially rising again by the end of the year. 50 bps is what October 26th brought and another possible rate hike in December. This will directly impact all HELOCs, unsecured Lines of Credit and variable-rate mortgages.

The big questions for many are should I lock in my mortgage and what happens at my renewal? The most important thing to remember is that the variable is 3 months of interest anytime to get out of and fixed comes with higher penalties if you break mid-term to renegotiate later. The other thing to remember is that if you paid 1.5% – 3.00% over the past couple of years and now the rate is 5.45% to 6.45%, you have paid an average of around 3.5% to 4.75%.

The idea behind a variable, was to pay the mortgage down while interest rates were at historical lows and then use the strategy to either go against inflation by increasing your payments, set your payments as if you were paying a fixed, invest or create cash flow. If you are looking to lock in, everyone has a different discount from prime and will be offered different rates to lock in. The lock-in rate will be a term that is equal to or greater than what you have left on your current term to avoid penalty.

So here are the steps to take if you are considering a lock-in rate. Call the lender and ask the following:

  1. What rate can you offer from 3- 5 year fixed?
  2. What is the current or remaining amortization?
  3. What would my new payments be with these new rates?
  4. What is the balance of the mortgage?
  5. Find out what the payment will look like if it goes up another 1% or more

Then you can email our team with these options, and we can see if there is something better for you available.

To speed things up for our team – make sure you know what your current rate is and put it in the email. Make sure you let us know who your lender/ bank is so we can get you some details

How To Fight Inflation

Here is a list of strategies and options we have put together for you to help you combat inflation:

  1. If you started a business, then make sure to pay off the no-tax deductible debt first like the mortgage
  2. Use savings to pre-pay the mortgage down for now and you can always pull back out later or set aside to pay the difference or pay off outside debt to outside debt
  3. Look at extending the amortization to 30 years if you have 20% equity
  4. Look at locking in and setting the rate to avoid fluctuations
  5. Consolidate debt into the mortgage such as credit cards, LOCS, and large expenses coming your way, pay off vehicles with high payments and put funds in your bank account – remember your equity is still your money
  6. Contact your car company and ask them to extend your car payments
  7. Add a HELOC to your house
  8. Potentially get a co-signor if you do not qualify to increase the mortgage such as a parent or sibling
  9. Turn your mortgage into a tax-deductible mortgage
  10. Add money to the mortgage to create an emergency fund
  11. Do not do accelerated payments for now. Go back to regular payments to increase monthly cash flows
  12. Lock into shorter terms
  13. Co live by house hacking and rent out space
  14. Co-mortgage with someone by inviting a joint partner to your home

The 5-year fixed today is between 4.89% and 5.89%. The rates will vary depending on what your current mortgage was priced at and the fixed lock-in rates with your lender.

So let us know if you have any questions or need any assistance.