You can use Ratehub’s penalty calculator to help you estimate this cost. If you believe that you can save more money by breaking your current variable rate, make sure to account for the cost of breaking your mortgage. If the discount to prime of the best variable rate you can get today is bigger than your current variable rate, then switching to a new variable rate may afford you more savings and provide a greater cushion against further rate increases. If the spread between your current rate and the best rate you can get today is greater than the amount by which you believe the prime rate will increase for the rest of your mortgage term, then you may end up saving more by keeping your current variable rate. The Bank reaffirmed its commitment to getting inflation back down to its 2% target, and did not rule out further rate hikes in 2023 in order to achieve this goal.īefore switching your mortgage, the main thing to consider is the spread between your current variable rate and the best fixed or variable rate you can get today. In its latest announcement on June 7, the Bank of Canada raised the Overnight Lending Rate by 0.25% in response to stronger-than-expected April inflation figures and unexpectedly high GDP growth in the first quarter of 2023, among other factors. fixed decision in the current rate environment and your decision should come down to your appetite for risk and your household finances. Therefore, you have to make the variable vs. However, it’s important to note that fixed rates increased significantly as well during this time period. You may be thinking about locking into a fixed rate because the prime rate increased throughout 2022 and early 2023 and your variable rate has moved substantially higher than where it was when you first signed your mortgage contract. That’s because fixed mortgage rates are currently priced within the expectation of where variable mortgage rates will trend throughout your term. Since you can’t go back in time and get the fixed rate you were offered at the beginning of your mortgage, the decision becomes more complicated. That said, the extreme volatility of the bond market makes it virtually impossible to predict where fixed mortgage rates will go in 2023, although we can expect them to remain elevated. With bond yields currently hovering above the 3.7% mark, there is strong upward pressure on fixed mortgage rates. These were some of the main factors that incited the Bank to once again raise its target for the overnight rate on June 7, which sent bond yields climbing even higher. However, these hopes were dashed by April’s higher-than-expected inflation figures, followed by surprisingly robust GDP growth in the first quarter of the year. In the first few months of 2023, cooling inflation allowed the Bank of Canada to adopt a conditional rate hold stance, which had many observers hoping that this would bring some much-needed stability to the bond market. This quickly reversed, however, once additional inflation data indicated the measure would remain higher than central banks anticipated. The roller coaster began at the beginning of 2023, when declining bond yields led to a brief period where lenders discounted their rates. There has been considerable volatility in the bond market so far in 2023, as it reacts to mixed economic data.
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