New year, crucial decision as interest rates are likely to rise

By all accounts, Bank of Canada set to make money more expensive in 2022

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Some Canadians face a key decision heading into the New Year because everyone believes their mortgage money is about to get more expensive.

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What should those with a variable rate do? Should they lock themselves up now? And what about those people who are considering a first jump into the housing market?

“The market is still very hot,” said mortgage broker Leah Zlatkin.

“I have clients who bid on houses in auction wars, and they always lose and don’t get the houses. “

Millions of Canadians flocked to adjustable rate mortgages in 2020 and 2021 due to record rates, according to figures from the Canadian Bankers Association.

But in 2022, those rates are expected to start rising slightly.

Earlier in December, RBC Economics wrote, “We expect policymakers to be nimble and increase the overnight rate early in the second quarter to avoid any persistent increase in inflation expectations,” said said economists.

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“Further increases will likely follow in the second half of the year and our call is that the bank will raise the policy rate by 75 basis points next year to 1%.”

This prospect has led mortgage brokers to say that they have been busy answering many customer questions.

“We still believe rates are likely to rise in mid-2022 based on the latest Bank of Canada announcement,” Zlatkin said.

So now is a good time for anyone with a variable rate to consider a potential next step if paying a higher rate hurts their stomachs.

For anyone stuck in the longer term, there will be no decision to make.

But what about those looking to buy soon: “What this means for people looking to shop: Get your pre-approvals now,” Zlatkin suggested.

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“Make sure you lock in that mortgage pre-approval if you haven’t found the home you want yet, you can get today’s rate as opposed to a future rate. “

Not only are rates expected to increase, but prices should follow.

REMAX Canada predicts that the average home price will increase 9.2% nationally in 2022.

With affordability already a major concern, some buyers may not wait for the generally busier spring.

“These are record rates,” observed Zlatkin.

“Usually a lot of people who want to ‘make a deal’ will try to buy in December, January.”