A peek into the murky crystal ball...

What I'm seeing a lot of...

Over the course of that last couple of months, we've been reaching out to clients with fixed and variable rates. It's been great to re-connect with our people to catch up and provide some guidance. There were a lot of similar questions and concerns about how to go forward but the most consistent was from variable clients wondering if it was time to convert to a fixed rate. It would seem that banks and financial institutions are applying some pressure to convert with statements like: "Lock it in before the next rate increase!". Or: "Rates will continue to go up across the board!". 

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There are at least a couple of issues I take with that thinking:

1. 5 year fixed rates have largely been the same since mid-June of this year with only ever-so-slight variances
2. Bank of Canada (BoC) changes have been baked into fixed rates for quite some time....say, since I don't know, mid-June. Those fixed rates will only adjust if the BoC surprises the market

Now, I wish I could tell you with certainty how this all plays out. But I can't. No one can. And if you'd have told me 12 months ago where we'd be today, I'd have said you were crazy. And I probably would have bet you that if you were right, I'd eat my laptop piece by piece for your amusement (is that keto-friendly?). But like the weatherman, I won't dare let being wrong deter me from making more predictions. Just be sure to BYO-Grain-of-Salt to the party.

I think it's very likely that fixed rates have all but peaked. Barring a shocking announcement from our fiends (not a typ-o) at the BoC next week, fixed mortgage rates won't rise much further - if at all. And not only have they probably peaked, but it's likely that in the near future, we'll start to see some increasing downward pressure on fixed rates. Unlike variable rates that adjust as a result of the BoC changes, fixed rates lead. They predict. They are tied on bonds and their yields which are traded constantly based on the future expectations traders. And just like they rose in the expectation of future BoC rate increases, they will lead in the opposite direction as we wade through an almost certain recession as they predict BoC rate cuts. And though they're slower to drop than they are to rise, that's almost certainly the rate-trend to watch in 2023.

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The rate increases we've seen so far are doing what they're supposed to do. And if given a little more time, they'll bring the metrics the BoC is focused on back into target range. It probably means that we'll see some tougher days in the immediate future as the economy as a whole slows down. But where we had all the inflation headlines we could handle, the news cycle is shifting their focus to recession articles. And other the other side of that, dare I dream, a return to normalcy? I mean it's either that or an alien invasion at this point. Unless they're already here....

What to do...

If you're coming up for renewal, or know someone in that boat, get a handle on your options. In most cases at renewal, we're able to offer up rates that are 0.3% to 0.5% below what your current financial institution will provide. 

If your monthly budget is feeling a little dicey at this point or you're self-employed and concerned about having a buffer, there are likely some relief options available: Wrapping in higher interest debts. Adding on a Home Equity Line of Credit. Extending Amortizations to lower payments. All of those options can be used to create some breathing room or create a better safety net.

The bottom line is that we're here to help. If you're in need of some guidance or know someone that does, please reach out!