What Rising Interest Rates Mean for your Mortgage
Your Home Mortgage and Rising Interest Rates
THUNDER BAY – Business – Over the last few years we have seen mortgage rates drop to decade lows, which has helped keep the housing market strong. Two important factors to the housing market are mortgage rates and the prices of housing. These factors have moved inversely of each other in recent years, with housing prices going steadily higher. As the economy slowly gets back on its feet, interest rates may start to rise as we have already seen over the last few months. How will that affect your current mortgage, or your mortgage upon renewal?
How Rising Rates Affect Fixed Mortgage Rates
Most homeowners opt for fixed mortgage rates, because it gives the borrower stability in their payments. Rising interest rates won’t affect those with a fixed mortgage, as those rates were locked in at the time of borrowing. However, if your mortgage is coming up for renewal in the next year or two and your rate is much higher than the rates that are currently offered, it may be of interest to you to review how much it would cost to renew your mortgage early. There are instances when the difference in the mortgage rate can actually save you money in the long run.
How Rising Rates Affect Variable Mortgage Rates
Those of you who have been using variable mortgage rates over the past few years have been fortunate enough to have enjoyed the historically low rates. The one tradeoff about variable mortgage rates is that they are subject to rate fluctuation which in the end can change your payments up to a few times a year. When rates were heading lower the fluctuations were beneficial to you, but if rates head higher they will do just the opposite. The option for you in this case is to compare what the current variable rates are to those fixed rates, as it may be worth locking in your rate over the next few years.
The Bottom Line
As the economic climate improves, mortgage rates are likely to be effected. Knowing that, there are advantages and disadvantages to each type of mortgage. While there is no perfect mortgage for everyone, it’s important to compare the differences and your options with your financial representative or mortgage specialist. Should you have any other questions about mortgages and mortgage rates, do not hesitate to contact me by email or phone.
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Anthony M. Talarico
Financial Security & Investment Representative
W: 807-343-4788 C: 807-472-6092