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Will Mortgage Rates Go Up in 2022?

The housing market of 2022 can be closely related to the state of the market in 2021. Speculations predict that although the housing market will experience weaker competition, the overall market is still expected to be volatile. This will impact the mortgage rates in 2022, and homebuyers might face a significant spike in expenses. 

 

The Bank Of Canada’s Recent Forecast

The Bank of Canada recently forecasted the mortgage interest rates for 2022 based on increasing government bond rates from 0.3% to 1.3% from January. This will have a significant impact on mortgage rates in 2022. Moreover, it also predicted that the short-term interest rates might start increasing from mid-2022. On the brighter side, speculations suggest that the five-year mortgage rates are expected to remain low by historical standards but will continue to rise by mid-2022. Several forecasters have anticipated that the economic recovery will be full of hurdles entering into 2022. Moreover, the short-term interest rates may not fall any further.

 

What Can Canadians Expect?

According to the Bank of Canada, variable mortgage rates today will stay low until inflation rates reach 2% and the economy recovers. Moreover, recent inflation rates have started raising concerns among Canadians. While borrowers can weather the economic storm with low rates, several Canadians use them to purchase larger homes. 

The predicted low-interest rates show that the economy may not recover any time before 2022. While COVID-19 has caused a drastic shrinkage of the economy, we can expect a bounce-back right after the pandemic clears. Because the economy is taking such a massive blow due to the pandemic, eventual recovery will seem considerable after the world returns to normal.

 

Variable Rate vs. Fixed Rate Mortgages

There are two types of mortgage loans – variable-rate mortgages and fixed-rate mortgages. Variable-rate mortgages are loans where the interest rate is periodically adjusted depending on the index reflecting the price to lenders. On the other side, fixed-rate mortgages are mortgage loans where interest rates usually remain the same throughout the loan term. As a result, people who prefer predictable payments usually find fixed-rate mortgages a better option. 

When interest rates are low but expected to increase shortly, choosing a fixed-rate mortgage is the better option. On the other hand, if interest rates are high but expected to decline, you should opt for a variable-rate mortgage. When interest rates are expected to go lower, you may end up paying more in the short term. Still, if you are comfortable and financially stable enough to take the risk, you can save money with a variable-rate over the long haul. 

 

Preparing for the New Year

If you are looking to change or buy a new home this coming year, there are a few things you need to keep in consideration. Forecasts show that prices are expected to fall in the short run. Adopting a “wait-and-see” approach may be beneficial for you during these times. If you are financially stable enough, the lower mortgage rates may provide you with higher purchasing power. However, this may inflate the value of a ‘standard home’ in downturn supply markets. 

However, if you plan to sell a house, selling sooner is way better than waiting it out till next year. It’s uncertain how the economic conditions may change in the near future. With unemployment still crawling through markets, there are high chances of some weakening in home valuations.

As you can see there are many factors affecting the right choice in home mortgages. Don’t take the chance of being caught out by incorrect speculation. Talk to a professional mortgage broker at Axiom Mortgage Solutions to receive the best mortgage guidance. We work with 27 different lenders to find you the perfect mortgage for your particular needs. Call our Windsor, Ontario office at 519-735-1440 or the Leamington, Ontario office at 519-326-4978 right away and lock in a possible deal! Alternatively you can reach us on our online contact form.

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