Things you need to know about interest rates so I can sleep at night knowing I told you before it was too late:
1. When the economy improves, rates will go up. This is because inflation puts upward pressure on bond yields, which leads to higher rates.
2. Fixed rates always move before variable rates. If you wait until the Bank of Canada announcement to lock in or get a rate hold, you’ve waited too long. Simply put, there is a free market for bonds which is always going to be faster and more responsive than a pre-scheduled announcement by a governing body.
3. Rates always go up faster than they go down. Surprised? You may have noticed the same principle applies to gasoline prices. It’s called Rockets and Feathers
4. If you’re serious about a variable rate, then STAY in a variable rate. Don’t try to play the “lock it in when rates start to go up” game. I have clients who didn’t listen to my advice and have 5 year fixed rates at 5.89% because they panicked. If they had stayed in a variable they would currently be paying about 1.35%. The same principle applies to trying to “time” the stock market. Staying the course is the only reasonable approach to maintaining the benefits of a variable rate in comparison with a fixed rate.
5. Things change…so keep an eye on this site for the latest as it happens.