TORONTO – The pandemic that has devastated the Canadian economy and caused widespread unemployment has also caused interest rates to drop near all-time lows.
“We now have a fixed five-year rate at 1.99 percent, the lowest ever in Canadian history,” said James Laird, co-founder of RateHub.ca.
The Bank of Canada reacted to the pandemic by cutting its key interest rate three times in March, but floating mortgage rates were not followed up. Indeed, mortgage rates have risen as banks have tried to create hedges against losses from COVID-19.
However, rates have now fallen close to historic lows.
RateHub.ca tracks the rates of dozens of lenders and, as of this week, HSBC offered the lowest rate at 1.99% on a five-year fixed mortgage. Over a five-year variable, HSBC again had the lowest rate at 1.75%.
Depending on the situation, these low rates could mean huge savings.
“It’s a great opportunity for anyone with a mortgage that is due or looking to buy a home,” said Frank Napolitano of Mortgage Brokers Ottawa.
It could also be an opportunity for some homeowners to refinance and consolidate debt.
“Some experts will tell you that there is still some room to get them down a little more, but the two percent is historically low and if you have a mortgage pending renewal or are looking to refinance now is the time to do it “, Napolitano
If you’re stuck on a long-term mortgage, you may be tempted to break it to take advantage of lower rates, but Laird says after paying the mortgage spread penalty to break your mortgage you may not be ahead.
“If the market rate today is much lower than what you have, then your penalty for breaking the mortgage will be quite high and so you will be neutral at best,” Laird said.
With an uncertain economy and COVID-19 still a threat to prosperity, low rates are likely to remain for some time.
“When we see poor economic news and unemployment numbers remain high, this will be good news for interest rates as they will need to stay low to help the recovery,” Laird said.
If you’re signing up for a new mortgage, it can pay to do your research. Even if you don’t switch to a new lender, it’s good to know what others are offering as it may help you negotiate a lower rate with your bank.