Lots and lots of calls these past few weeks from variable rate clients! So many are wondering if now is when they should be locking in with the Bank of Canada forecasting three rate hikes in 2019, on top of the one expected and delivered last week. This forecast on the heels of their rate announcement in October.

Well things have changed, and continue to evolve, so don’t be too hasty.

If you’re in a variable rate term, have a read of Rob McLister’s recent article in the Globe and Mail. He states at least nine reasons why the “rising rates narrative” is inconsistent with the current economy.

So what if you’re currently in a variable rate term?

If you’re in a relatively new term, you likely have a deeper discount off of Prime (in the vicinity of Prime minus 1%). If you’re half you’re more than a year into your variable rate term, your discount might not be as good (ie. closer to Prime minus 0.50%).

If you fall into the first group, good for you, stay there! If you fall into the second group. there may be an opportunity to switch into a deeper discount before lenders decrease discounts in light of the decrease in the bond yield in recent weeks. If you act fast, you may be able to secure a new five year term at or about the Prime minus 1% and save yourself a boat load of interest.

Keep in mind, there is a penalty to switch mid-term, but the interest savings may well be worth it. If you’re not sure, let’s talk.

What if I’m buying or renewing, should I consider a variable rate term?

The rates stated in Rob’s are more applicable in Ontario but they’re not far off here in Alberta. If you’re thinking of a variable rate term, the door might be closing on these nice, deep discounts which will lead to significant interest savings. The sooner you can secure a rate, the better!

As we continue to see the bond yield drop, lenders will be looking to protect their margins, so expect these discounts to get shallower.

What about fixed rates?

If it were any other time of the year, we would see lenders dropping rates due to the decreasing bond yield. So why aren’t we?

Well as Rob so aptly puts it: “As we approach the winter doldrums, the slowest time of year for mortgages, banks figure that slashing rates now would barely move the needle on their mortgage market share, so why give up margin for no reason?”

So don’t expect to see rates drop before the new year, and even then, they’ll want to see the market picking up steam again.