TORONTO -- The pandemic that ravaged Canada’s economy and caused widespread unemployment has also caused interest rates to fall to near historic lows.
“We now have a five year fixed rate at 1.99 percent that's the lowest it's even been in Canadian history,” James Laird, co-founder of RateHub.ca, said.
The Bank of Canada reacted to the pandemic by slashing the key interest rate three times in March, but variable mortgage rates didn't follow. In fact, mortgage rates went up as banks tried to build in protections against losses due to COVID-19.
However, now rates have dropped to near historic lows.
RateHub.ca tracks rates from dozens of lenders and as of this week, on a five-year fixed mortgage HSBC was offering the lowest rate at 1.99 per cent. On a five year variable again HSBC had the lowest rate at 1.75 per cent.
Depending on your situation these low rates could mean huge savings.
“It’s a great opportunity for anyone who has a mortgage coming up for maturity or is looking to buy a house," 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 there is still a little room for them to come down a little bit more, but two percent is historically low and if you have a mortgage up for renewal or you're looking to refinance now is the time to do it,” Napolitano
If you're locked in to a long-term mortgage, you may be tempted to break it to take advantage of lower rates, but Laird says after paying the mortgage differential penalty to break your mortgage you may not be further ahead.
“If the market rate today is a lot lower than what you have, than your penalty to break your mortgage is going to be quite large and so you are going to be neutral at best" said Laird.
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 staying high, that's going to be good news for interest rates as they will have to stay low to help in 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 could help you negotiate a lower rate with your bank.
