Real Estate

Mortgage & Interest rate direction?

  • Last Updated:
  • May 14th, 2020 2:15 pm
[OP]
Jr. Member
Oct 25, 2014
164 posts
55 upvotes
Toronto, ON

Mortgage & Interest rate direction?

I know no one has a crystal ball to predict the future...but just for discussion purpose, where do you guys think the interest rates & mortgages are heading in the next few years?
My mortgage renewal coming, I've picked variable the last 2 terms because I always believe interest rate would never go too high coz the government wouldn't let it as it would lead to too many people under water and a lot of unhappy voters.
I think this is now especially true with the depression we are heading into.

But, with the crazy amount of money our government is spending because of covid 19, would it lead to raising interest rate even if the government try to keep it down? (Generally high government spending & deficit lead to higher interest rate)

FYI, 5yr closed variable rate are at P-0.2 (2.25%) and fixed at 2.45%

This time I am more worried about picking variable because even if the government want to keep the rate low, the bank might raise their prime rate regardless?
11 replies
Jr. Member
Jan 31, 2013
115 posts
105 upvotes
Toronto
I hear we'll have negative interest rates soon and the banks will be paying homeowners to take out mortgages.
Jr. Member
Sep 13, 2007
148 posts
183 upvotes
toronto
Reakt0r wrote: I hear we'll have negative interest rates soon and the banks will be paying homeowners to take out mortgages.
That is likely fake news. Banks will raise the rates not because of BOC rates but due to increased risk which will play into lending to you and I. Rest assured , banks aren't in the Business of losing money. See those shiny towers downtown? They are there for a reason. Banks are the best Business in the world.
[OP]
Jr. Member
Oct 25, 2014
164 posts
55 upvotes
Toronto, ON
als98 wrote: That is likely fake news. Banks will raise the rates not because of BOC rates but due to increased risk which will play into lending to you and I. Rest assured , banks aren't in the Business of losing money. See those shiny towers downtown? They are there for a reason. Banks are the best Business in the world.
Yea that's what I am thinking as well.

Default and risk going to go way up and banks are going to want higher rate to compensate for that. And government massive deficit and borrowing are going up market borrowing rate higher too
On the other side is government & BOC wanting to lower rate as much as possible
Deal Addict
Oct 29, 2010
4316 posts
665 upvotes
Negative rates doesn’t mean that us, the end user will end up receiving money to take a mortgage.

For example, a couple of weeks ago we had barrel of oil sell for -$40. What was the price at the pump? More than 0.
Deal Addict
Mar 2, 2017
1068 posts
1956 upvotes
Toronto
Bank of Canada and Financial institutions raising rates in the near future (within 24 months) would seem like suicide to me. If you are risk averse go with a fixed rate, but more likely than not going variable is the smarter financial decision as it's unlikely we will see rate increases.
Realtor, Investor, CPA
Sr. Member
User avatar
Dec 28, 2010
637 posts
286 upvotes
Reakt0r wrote: I hear we'll have negative interest rates soon and the banks will be paying homeowners to take out mortgages.
With negative interest rates, you will have to pay the bank to have money in the bank. Where they are paying you now an interest rate for your money (however low it is) you will be charged on top of a monthly fee.
Do you want to meet the love of your life? Look in the mirror. | Byron Katie
Deal Addict
Jan 9, 2010
2018 posts
1400 upvotes
VESTEGAARD wrote: With negative interest rates, you will have to pay the bank to have money in the bank. Where they are paying you now an interest rate for your money (however low it is) you will be charged on top of a monthly fee.
Sadly enough, if you think about all the monthly bank fees that a lot of people are paying, this is already happening.
Deal Fanatic
User avatar
Feb 2, 2014
8575 posts
2449 upvotes
Toronto
stanleyt wrote: I know no one has a crystal ball to predict the future...but just for discussion purpose, where do you guys think the interest rates & mortgages are heading in the next few years?
My mortgage renewal coming, I've picked variable the last 2 terms because I always believe interest rate would never go too high coz the government wouldn't let it as it would lead to too many people under water and a lot of unhappy voters.
I think this is now especially true with the depression we are heading into.

But, with the crazy amount of money our government is spending because of covid 19, would it lead to raising interest rate even if the government try to keep it down? (Generally high government spending & deficit lead to higher interest rate)

FYI, 5yr closed variable rate are at P-0.2 (2.25%) and fixed at 2.45%

This time I am more worried about picking variable because even if the government want to keep the rate low, the bank might raise their prime rate regardless?
Go variable if you're not too risk averse.

Rates aren't going up anytime soon. You may see the overnight rate (which effects lender's Prime) drop again in the near future.

PLUS, penalty is capped at 3 months interest if you have to break (versus GREATER of IRD or 3 months interest for fixed).

For an uninsured transfer, you can go as low as Prime -.45% with standard terms and conditions with transfer fees covered (legals and appraisals).
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Fanatic
User avatar
Dec 24, 2002
5979 posts
1028 upvotes
i'm on variable and intend to stick that way ..this is probably worse that 2008 and it took a long time for any rate increases....I'm using that time to pay down as much of the mortgage as possible ( still working ) , if rates do go up for me it'l be on a lot smaller number
http://www.heatware.com/eval.php?id=14378
Ole Gunnar IN!!!!
I promise not to cut your taxes but I won't raise them either.
Deal Fanatic
Apr 5, 2016
5012 posts
3552 upvotes
Calgary/Vancouver
Posted rates dropped for BMO. 4.94% for 5 year fixed. Believe RBC is the same and all the other banks at 4.99% with CIBC holding out at 5.04%. Doesn't mean much since no one gets posted rates and may help with calculating prepayment charges and predicting where interest rates are going.
Current Fido and Rogers customer.
Ex Koodo customer.
Jr. Member
Jan 31, 2013
115 posts
105 upvotes
Toronto
VESTEGAARD wrote: With negative interest rates, you will have to pay the bank to have money in the bank. Where they are paying you now an interest rate for your money (however low it is) you will be charged on top of a monthly fee.
Um, excuse me? I invested all my money into preconstruction condos. That's why the bank should have to pay me.

Top