Should I lock in my mortgage rate?

​​In recent years, many Canadians rode the wave of record-low interest rates by opting for variable-rate mortgages. However, the tide has turned since March of last year, with rates on the rise and the possibility of more increases on the horizon. Faced with this uncertainty, our clients are asking a common question: Should they lock into a fixed rate? 

Here's how we guide them through the decision-making process.

Why go fixed? 

Locking into a fixed rate can provide financial stability and potentially secure a lower interest rate. But, before you commit, it's crucial to consider both short and long-term implications.

Key considerations:

• Financial snapshot: Evaluate your current income and debt levels.

• Future outlook: Do you anticipate changes in your financial situation?

• Monthly manageability: Can you comfortably handle your current monthly payments?

• Property plans: Are you planning to sell in the near future?

• Property portfolio: Do you own multiple properties?

• Renewal timing: When is your mortgage up for renewal?

Making the decision

If you're leaning towards a fixed rate, follow this 3-step process:

1. Check with your lender: Inquire about the rates they can offer you.

2. Contact a mortgage broker: They can help you understand your goals and challenges.

3. Weigh your options: A mortgage broker can help you decide whether to lock in, switch lenders for a better rate, or consider refinancing.

Tips for variable rates

For those with variable-rate mortgages, consider the following strategies:

• Payment frequency: Increase payment frequency (e.g., bi-weekly).

• Payment amount: If possible, increase your payment amount.

• Lump sum payments: Make occasional lump sum payments, especially if you receive bonuses. This accelerates mortgage paydown and can lower future monthly payments.

Notable mortgage trends

• 2-year rates: Generally speaking, 2-year mortgage rates are favourable. However, because the rate is typically higher than the 3- or 5-year mortgage terms, most borrowers opt for the 3-year rate, finding it’s the most balanced choice (the 2-year rate is too expensive and the 5-year rate is too long).

• Luxury property impact: Toronto’s updated land transfer tax will likely drive demand this year but could soften demand in early 2024 as buyers get accustomed to the higher rates.

• Commercial mortgage scrutiny: Lenders are closely examining commercial mortgages on land and office buildings, and they’re favouring strong borrowers.

Plan Ahead

If your mortgage renewal is within the next six months, get in touch today – we can start building your profile and potentially help you secure favourable rates in advance.