The pandemic that has ravaged the Canadian economy and caused widespread unemployment has also caused interest rates to fall to levels close to historic lows. “We now have a five-year fixed rate of 1.99 per cent, the lowest in Canadian history,” said James Laird, co-founder of RateHub.ca.
The Bank of Canada responded to the pandemic by cutting the key interest rate three times in March, but variable mortgage rates did not follow. In fact, mortgage rates increased as banks tried to put in place protections against losses against COVID-19.
However, now rates have fallen to levels near their historic lows.
RateHub.ca follows the rates of dozens of lenders and, as of this week, on a five-year fixed mortgage, HSBC offered 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 result in huge savings.
“This is a great opportunity for anyone with a mortgage coming up for maturity 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 their debt.
“Some experts will tell you that there is still a bit of room for them to go down a bit more, but two percent is historically low and if you have a mortgage for renewal or you are looking to refinance now is the time to do so,” Napolitano
If you’re locked into 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 can’t be further ahead.
“I market rate today is much lower than what you have, that your penalty for breaking your mortgage is going to be quite large and so you’re going to be neutral at the moo,” 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 bad economic news and the unemployment rate remains high, it will be good news for interest rates, as they will have to stay low to help the recovery,” Laird said.
If you sign 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.