With the Bank of Canada recently making several adjustments to its prime lending rate, we have seen an increase in lending rates across the board. Five year fixed rates have increased substantially from as low as 2.49% all the way up to 3.24% that they are now. With these rate increases and potentially more on the way, it is important that you are reviewing your mortgage plan for the coming year with your mortgage broker. Through planning and constant review, it is possible that you could save thousands in interest in the years to come.
With the internet widely available and google at our fingertips, consumers are more educated today than they ever have been in the past. We actively search for the best deal for our flight to Hawaii or family vacation to Disneyland but how much homework are homeowners doing when it comes to their mortgage?
A recent poll from IPSOS concluded that 60% of consumers said they do a lot of research when arranging a mortgage, the same was not true for consumers who were renewing their mortgage. When renewing their home loan just 42% of homeowners do a lot of research and 22% renew without doing any research at all. When arranging a new mortgage or renewing, baby boomers are least likely to do research on mortgage rates (27%) while 48% of millennials do so; Gen-Xers fall between the two groups.
The data above is certainly disappointing as your mortgage is potentially where you can save yourself tens of thousands of dollars in interest over the 25-30 year lifespan of that mortgage.
The truth behind the data above is that the majority of consumers have a hard time understanding how common financial products work and as such have a difficult time deciding what product is right for their needs without the help of a professional.
Best strategy to manage your mortgage
The best strategy for consumers is to partner with a Mortgage Broker who can actively manage your mortgage for you. A good mortgage broker will conduct annual reviews with you to ensure that your mortgage is optimized for your ever-changing needs. They should also be contacting you at least 6 months out from your renewal date to start the planning process for your renewal. By working with a Mortgage Broker who will actively manage your mortgage for you, it takes away your need to dedicate time and energy to conducting the research noted above on your own.
If you have a renewal coming up in the next year and are concerned about interest rates, please feel free to reach out to our team and we would be happy to review your file with you.