Blog Post

Changing Interest Rates January 2018

Anita Groves • January 30, 2018

Over the last couple of weeks, you’ve no doubt heard that interest rates have been on the move. Most fixed rate products have seen a small increase in rate, while just last week the Bank of Canada announced an increase that impacted the prime lending rate. So if you are in a variable rate product, your payments have gone up by roughly $13.10 per every $100k mortgage balance owing. If you’re looking to get into the housing marketing and looking for a fixed rate product, things have just gotten a little more expensive for you as well… but what if you already have a mortgage, with a fixed rate, do these changes impact you at all? Well, as it relates to your mortgage, no, but it might impact your investments.

Nest Wealth; one of Canada’s leading online investment advisors, just released an article titled Interest Rates Changed – Should Your Investment Portfolio? It has been included below for your reading pleasure! If you have any mortgage questions, please don’t hesitate to contact me anytime!

Interest Rates Changed – Should Your Investment Portfolio?

The reason some investors who own bond funds are concerned about the recent interest rate hike is because when rates go up, bond prices go down. So this week’s rate hike, has led some investors to question whether they should scale back or dump their bond funds.

There are no straight answers to this question because there are a number of variables which are too complex to cover in this one post. But there are a couple of rules of thumb that we can offer to help guide investors.

Bonds Have Different Levels of Sensitivities

Bonds are really just an IOU. When you buy a bond, you’re giving a loan, and in return, you get a regular stream of interest payments until the borrower returns your loan in full (i.e. the bond’s term).

When rates go up, this has less of an impact on short and medium term bonds (bonds with terms between 1 to 5 years). The simple explanation is that lenders and borrowers only need to accept the lower interest payments for a shorter time. So the recent interest hike had less of an impact on this group of bonds.

Bonds Play a Unique and Important Role

It’s important to understand that bonds, like other asset classes, have a specific role in a portfolio. Whereas equities are meant to provide the potential of growth, the main responsibilities of bonds are to provide stability to your portfolio.

As equities and bonds tend to perform in opposite directions. That is, when equities are performing well, bonds are slowing down. Since market conditions change continuously, including a mix of equities and bonds into your portfolio helps to minimize the return fluctuation in your portfolio. This is particularly important for the investors nearing retirement who need more stable and consistent returns.

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Anita Groves

PROFESSIONAL MORTGAGE BROKER

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Fixed or Variable Mortgage? How Canada’s Economic Shifts Could Impact Your Decision

By Anita Groves • February 24, 2025

Navigating Mortgage Rates in an Uncertain Market With Canada’s economy facing trade tensions, inflation concerns, and a potential slowdown, mortgage rates are in flux. Borrowers must weigh the risks and rewards of fixed vs. variable rates to make the best decision for their financial future. What’s Driving Mortgage Rate Changes? Several key factors are shaping the mortgage landscape: Trade Uncertainty – New tariffs between the U.S. and Canada could push inflation higher, impacting bond yields and fixed mortgage rates. Inflation Pressures – If inflation stays above the Bank of Canada’s 2% target, rate cuts may be delayed, keeping borrowing costs higher. Recession Concerns – If economic growth slows, the BoC could cut rates, making variable-rate mortgages more attractive. Fixed vs. Variable: Which One is Right for You? 🔒 Fixed-Rate Mortgages: ✅ Predictable payments for peace of mind ✅ Protection from future rate hikes ❌ Typically higher initial rates ❌ Costly penalties if you break your term early 📊 Variable-Rate Mortgages: ✅ Lower starting rates with potential for savings ✅ Easier to break or refinance if needed ❌ Payments can fluctuate with rate changes ❌ Higher risk if inflation pushes rates upward What’s the Best Move Right Now? ✔ Go Fixed if you want stability and protection from rising rates. ✔ Go Variable if you believe rates will drop and you can handle some risk. ✔ Consider a Hybrid Mortgage to get the best of both worlds. Stay Flexible & Informed Mortgage rates are unpredictable, and the best choice today may change in a few months. Working with a mortgage professional can help you navigate these shifts and secure the best deal for your financial future. Need expert guidance? Reach out today to discuss your options!

How to Ensure a Smooth Home Purchase

By Anita Groves • February 19, 2025

Chances are, buying a home is one of the most important financial decisions you’ll make in your life. And as mortgage financing can be somewhat confusing at the best of times, to alleviate some of the stress and to ensure your home purchase goes as smoothly as possible, here are six very high-level steps you should follow. While it might seem like the best place to start the home buying process is to browse MLS on your phone and then contact a Realtor to go out and look at properties, it’s not. First, you’re going to want to work with a licensed independent mortgage professional. When you work with an independent mortgage professional, instead of working with a single bank, you’ll be working with someone who has your best interest in mind and can present you with mortgage options from several financial institutions. The second step in the home buying process is to put together a mortgage plan. Unless you have enough money in the bank to buy a home with cash, you’re going to need a mortgage. And as mortgage financing can be challenging and not so straightforward, the best time to start planning for a mortgage is right now. Don’t make another move until you discuss your financial situation with an independent mortgage professional. It’s never too early to start planning. As part of your mortgage plan, you’ll want to figure out what you can afford on paper, assess your credit score, run some financial scenarios, calculate mortgage payments, and have a clear picture of exactly how much money is required for a downpayment and closing costs. You’ll also be able to discuss which mortgage product is best for you, considering different mortgage terms, types, amortizations, and features. Now, what you qualify to borrow on paper doesn’t necessarily mean you can actually afford the payments in real life. You need to consider your lifestyle and what you spend your money on. Understanding your cash flow is the key. Make a budget to verify you can actually afford your proposed mortgage payments and that you have enough funds to close on the mortgage. No one wants to be house-poor or left scrambling to come up with funds to close at the last minute. If everything looks good at this point, the next step will be to get a preapproval in place. Now, a pre-approval is more than just typing some numbers into a form or online calculator; you need to complete a mortgage application and submit all the documents requested by your mortgage professional. Only proceed with looking at properties when you’ve been given the green light from your mortgage professional. When you’ve found a property to purchase, you’ll work very closely with your mortgage professional to arrange mortgage financing in a short period of time. This is where being prepared pays off. As you’ve already collected and submitted many documents upfront during the preapproval process, you should be set up for success. However, remain flexible and provide any additional documentation required by the lender to secure mortgage financing. Once you have firm lender approval and you’ve removed conditions on the purchase agreement, don’t change anything about your financial situation until you have the keys. Don’t quit your job, don’t take out a new loan, or don’t make a large withdrawal from your bank account. Put your life into a holding pattern until you take possession of your new home. So there you have it, six steps to ensuring a smooth home purchase: Work with an independent mortgage professional. Put together a mortgage plan. Figure out what you can actually afford. Get a pre-approval. Provide the necessary documentation. Don’t change anything about your financial situation until you take possession. If you’d like to discuss your personal financial situation and find the best mortgage product for you, let’s work together. We can figure out a plan to buy a home as stress-free as possible. Please connect anytime; it would be a pleasure to work with you.