Should You Lock in Your Mortgage?

Should you Lock in your Variable Rate Mortgage today?

Many of the top economists in Canada today are expecting the Bank of Canada to increase the prime rate up to 8 times over the course of the next calendar year. We at find is surprising that the top economists in Canada are expecting this type of velocity of rate hikes during a Covid lockdown without properly measured signaling beforehand. The biggest reason for these rate increases is to get get inflation under control. The bet is that the overnight rate band will be increased, leading to the start of prime rate hikes beginning at the next policy meeting on March 2, and then quantitative tightening shortly after that.

Traders continue to bet that the Bank of Canada may hike interest rates by 25 basis points five or six times this year. This would take the overnight rate from 0.25% to 1.5% to 1.75%. It was 1.75% in February of 2020 before the pandemic easing began. So, in other words, it is expected that rates will get back to pre-covid levels within this next calendar year.

One key point is that currently, all of this is purely speculation. We look at the worst case scenario being that variable and fixed rates in the next 1 to 3 years will basically match where they stand today.

If you are currently in a mortgage or nearing the end of your term,  now is the time to review options such as borrowing against your equity or renewing to lock into a lower rate. Contact Us to Discuss these options. 

The Prime Rate in Canada is currently 2.45%

History of the Prime Rate and Bank of Canada Overnight Rate

  • Bank of Canada Overnight Rate = Orange
  • Prime Rate = Blue

Locking in to a fixed rate term right now does not offer up any potential for interest savings – staying the course with your variable rate for now puts a borrower further ahead. As an example, with prime still at 2.45% – even if it was increased to 2.70% and you have a discount of 1% below prime, your rate will be 1.7% sticking to variable vs around 3% today if you chose to lock in.  

Perhaps it’s more about your risk, if a news article makes you nervous and you can’t sleep at night, you may choose fixed and pay more for that reason alone. We believe that there is no dollar amount in savings that is worth it if you are going to be losing sleep and it impacting your life. 

If you have any questions or would like to discuss your specific details, please feel free to reach out anytime. We’re here to help


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