Most homeowners who are renewing their mortgage in 2019 are set to land a new deal at an equally good interest rate, according to a survey of Canadian homeowners by RateHub.ca.
This is despite the Bank of Canada raising overnight rates three times in the past year alone, and five times since July 2017.
Of the 19 per cent of homeowners surveyed who are renewing their mortgage in 2019, 82 per cent have a fixed-rate mortgage. This is set by government bond yields, rather than the Bank of Canada overnight rate, which affects variable rate mortgages. Bond yields have also increased over the past couple of years, causing typical fixed-rate mortgages to increase around half a percentage point compared with 2014.
Despite the rise in fixed interest rates, the average interest rate currently paid by survey respondents with a fixed-rate mortgage is 3.65 per cent, said the mortgage comparison website. This compares with currently available five-year fixed “best rate” of 3.34 per cent.
Nearly half (48 per cent) of the respondents said they believe their mortgage payments will either stay the same or decrease after renewing next year.
However, this optimism may be partly influenced by financial necessity. Of those homeowners set to renew next year, 31 per cent say they can afford less than a $100 increase in monthly mortgage payments, said RateHub.
RateHub added that homeowners with a variable rate may also benefit from renewing soon. They are currently paying an average rate of 2.89 per cent, while the best variable rate today is 2.59 per cent.
The survey report said that more than three-quarters of renewing respondents plan to shop around for the best rate, rather than necessarily sticking with their current lender. Although 64 per cent of respondents applied for their current mortgage directly through their lender, 66 per cent said they would go through a broker next time to help find the best deal.
RateHub said, “Renewers should keep in mind that their lenders will send them a renewal letter offering a new rate. While it might be lower than their current rate, it could possibly be beaten by a competing lender.”
It added, “To ensure the best rate – and to minimize any headaches – owners should begin rate shopping up to 120 days before their term is up.”