Expert urges Canadians to hold off on mortgage renewals

Following the Bank of Canada’s latest announcement, a mortgage broker says people with mortgage renewals approaching should wait to renew.

Bank of Canada has raised its key interest rate to five per cent, up by 25 basis points. This interest rate hike marks the first time since 2001 to hit five per cent.

Frank Napolitano, with Mortgage Brokers Ottawa, told The Sam Laprade Show on July 12, if your mortgage is up for renewal in the next six months, avoid being in a rush to renew in advance.

“I know banks are aggressive at calling customers today, trying to keep their business six months out, said Napolitano. “Banks are saying you should early renew because rates could be higher.”

But Napolitano explained, while he predicts mortgage rates will decline over the next six months, people struggling to make ends meet should consider refinancing and increasing amortization periods while rates remain high.

“If your mortgage is up for renewal heading into the next six months, you’re coming off of a mortgage probably in the high two’s to mid three’s (per cent). Now you’re having to renew in the five’s and that has a big impact on your every day dollar,” he added.

According to Napolitano, the Governor of the Bank of Canada said there should be no concerns of rising interest rates over the next few years, as we emerge from the Covid-19 pandemic. Therefore, Canadians took advantage of a variable rate mortgage instead of locking in, and now they’re paying a heavy price – in the form of higher mortgage payments and cost of goods.

“We saw inflation go down by one percentage point this month, we saw unemployment go up by two or three tenths of a percent, and this is good news as far as allowing Bank of Canada to pause, and hopefully pause for good, on the increases,” said Napolitano.

Napolitano said he expects to see a significant mortgage rate decrease over the next six months, and explained, Canadians should hold onto lower mortgage rates for as long as possible.