“Rate increase announcement just came in. What am I to do now?”

Although the Bank of Canada is maintaining its position, major banks announced mortgage rate increases last week. No big surprise. We have been reading about it in the papers, we knew it was going to happen sooner or later. Do we need to panic now?

Here are a few of the most common questions I am asked by my clients:

Q: What do I do with my mortgage: Do I stay in with a variable rate? Do I lock into a fixed 3-5 year term?

Firstly, there is no single, universal answer to what you should do with your mortgage. There are personal variables that will influence your situation and your decision. For example, some of my mortgages are on variable rate, others I have locked into a long term fixed rate.

I only have one word of advice: if you are stretched and are vulnerable to even a slight rate increase, don’t risk. Lock in. We are unlikely to see huge increases in the near future. But everything indicates that rates will go up over the next few years depending on how the economy and inflation progress.

To get more information on your personal situation, I highly recommend you consult with a professional advisor (I use Jon Sowerby (jon@tvhfinancial.ca or 416-488-0074 for all my personal mortgage needs: he knows and understands financing; is an excellent listener and communicator and will give you the best advice based on your personal and individual needs. Unlike the big banks, he will “shop” your mortgage around and get the best terms and rates).

Regardless of your decision, we are still looking at the lowest rates in History. Money is still cheap and it is still a great time to do what you planned to do: get a bigger home, buy a cottage, to put an addition on your home, buy an investment property using the equity that is sitting dormant in your current home.

Q.: Will the rate increase and new mortgage rules affect the market?

I certainly hope so. A market that is escalating too steeply for too long is never good in a long term. We don’t want to see (and won’t see) crashes and declines, but some cooling off is long overdue. I would much prefer a balanced, sane and healthy market. Annual double digit appreciation is always a recipe for correction.

As always, if you have a question or concern that you would like to ask or discuss, feel free to give me a call. I have been successfully advising clients for 30 years. I am always happy to help.

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