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Rising Mortgage Rates Affects Alberta Home Buyers

Posted by samanthas on August 27, 2013 in Finance, Home Living Tips with No Comments


Calgary Lethbridge mortgage brokerOver the last few years, interest rates on mortgages have been at all-time lows. Lately, however, these interest rates are starting to slowly rise again. Locking in for 5 or even 10 years on a mortgage rate – is considered a prudent way to protect yourself before they rise further.

Due to the rise in rates, many Canadians are also doing they’re very best to pay off their mortgages as quickly as possible to avoid paying more interest. The longer it takes to pay off the mortgage, the more interest will be paid out over that period.

The U.S. Federal Reserve is partly to blame for the rise in interest rates. As bond rates rise, mortgage rates follow suit. The question of whether or not Ottawa needs to step into the Canadian real estate market is still debatable.

Fixed rate mortgages have risen from 3% to 3.5% for a 5-year closed mortgage. Although this may not sound like much, over the duration of a mortgage, this can will amount to quite a bit more interest paid. For example, a $400,000 mortgage at 3.5% with a 25-year amortization period translates into $1,997.09 in monthly payments, with $64,944.76 paid in interest over a 5 year term. Compare that to the same mortgage at 3%, to get $1,892.99 in monthly payments, and $55,477.30 paid in interest over the 5 year term. That’s a difference of almost $10,000 in interest paid over the 5 years.

According to chief executive of CAAMP, Jim Murphy, the impact of higher mortgage rates will most certainly negatively affect first-time buyers, particularly since entering the housing market is difficult enough with sky-high property prices. “All of these changes have impacted the first-time buyer,” said Mr. Murphy. “Now we are seeing rising rates and that will have an impact too.”

It’s extremely difficult to crack the market as it is, let alone with increasing interest rates. Although the real estate market may be affected, your best option is to work with a Calgary Lethbridge mortgage broker who can shop your loan over lenders across Canada to find you the best rates and terms – often saving you thousands in interest over the term of the mortgage.  Since a mortgage broker works for you – not the bank – they can give you expert, unbiased advice – and it is free!

To have all your mortgage questions answered, contact Jim Black and his team at Mortgage Loans Alberta, (877) 394-9422, today.

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