Fewer people are buying into a premise that mortgage rates could rise this year.
Almost half (46%) of Canadians believe that today's record-low rates will stick around for at least one more year. That's almost double the 24% who, in 2011, said the same thing. (This data comes from a new CIBC survey released on March 14, 2013).
These findings raise some interesting questions, not the least of which being: are Canadians' rate expectations even relevant to the mortgage selection process ?
In other words, if an individual now expects extended low rates, should that be a factor when he/she chooses a term?
The short answer is no, says Colette Delaney, Executive Vice President of Mortgage, Lending, Insurance and Deposit Products, CIBC.
Rate is certainly a factor in the decision, buy trying to predict rates as part of a decision to choose the best mortgage for you is not advisable, she adds.
Rates have a long track record of defying expectations. Delaney says it is more important to pick a term that matches your financial circumstances and plans.
One's choice of term should thus be geared to things like:
- Your ability to absorb higher rates (and payments)
- The time you expect to hold your mortgage
- Job stability
- Ability to prove income (an issue for some self-employed borrowers with mortgages that are coming due in a tighter lending environment)
It is recommended that borrowers consider setting their mortgage payment "at the amount it would be if rates were 1-2% higher". Not only does this help to reduce the principal amount owing BUT, it prepares Canadians for future rate increases !
