If you’re still tuned, perhaps the question remain; ‘should I lock my variable rate mortgage to a fixed?’ the answer is no… probably. Results will vary though, so speak to an expert.

No not your lender, your lender wants you to lock in.

In fact the person who calls you from a lender to ‘check in with you about locking in’ is often paid a tidy little bonus for every convert they get moving out of variable – why do you think this is?

Because you locking in your mortgage is a guaranteed lock in for the lender of (much) higher profits for the lender.

And if you think about it, you’ll still have a pending renewal date to lay in bed awake worrying about.

Although why are you worrying at all?

You’ve enjoyed ~1.20% for a while, now you’re at ~1.95% which is still pretty amazing (ask your parents) and by the end of this year it certainly seems like you might get all the way to 4% sure… but for how long?

How far up will rates go?

The BOC has offered clarity on this.

The BOC upper range of increases is a total 2%, which would take is to Prime @5.25 – minus your discount… with rates more likely to settle out closer to 4.25% or 1.75% – less your discount… based on today’s intel.

Keep in mind that the BOC has been trying to push rates back up into that range since 2008.

To no avail.

The bigger question today is will higher rates fix inflation?

I think not, because of the root causes of inflation today.

No, I’d say higher rates have a strong chance of hammering the brakes hard on the one area of our economy that has been creating unlimited employment opportunities – housing.

Combine this with the opposing force of political pressure to create new housing. Which means stimulating the construction industry… not paralyzing it.

If steadily increasing rates stagnate home building and by extension home sales, then we may beging to hear the R word.

Recession.

And what does a central banker do when an economy slides into recession?

They lower interest rates to stimulate said economy.

Going much higher with interest rates runs the risk of treating the ailment of inflation (caused by neer before seen supply chain issues) with the same old medicine used to fight regular inflation – but this is not normal inflation at all, and it seems unlikely to this laymen that responding with the standard medicine of simply jacking up interest rates will not work.

In other words, what goes up (Prime)… could well come back down.

Yes, in a way I’m still clinging to part of my pre-war predictions from the start of this year.

And so for now, I’ll stay variable.

As much as I believe there’s ‘no way I’m selling my home’… well let’s just say that I’ve been around the block(s) enough times to know that I don’t know what I’m talking about when I say ‘I’m not moving’ – and frankly, neither do you.

The fact is that 2/3 of us will not be in the same mortgage product an average of 33 months from now.

Cheers!

Pam Woolger, Mortgage Broker, Axiom Mortgage Solutions
www.pamwoolger.com