It’s expensive living in or around Toronto, and rising mortgage rates are one of the reasons why! While living in Toronto or one of its suburbs has never been inexpensive, house prices and mortgage rates continue to rise, making buying a home or condo seem out of reach for many families.

We’ll explain two factors that cause mortgage rates to increase – the overnight lending rate and the bond market. We’ll also explain what factors impact if you should select a fixed or varied mortgage rate.

The Overnight Lending Rate

The overnight lending rate is the rate at which banks lend money to each other. This rate is adjusted eight times a year by the Bank of Canada. Since last year, the overnight rate has increased by .25%.

When a change is made to the overnight lending rate, this impacts prime lending rates (the rate that commercial banks charge their most credit-worthy customers). Banks typically use the prime rate to determine how much interest to charge on their variable-rate mortgages.

The Bond Market

Bonds are a type of debt investors fund, who are then repaid the principal with interest. They are generally very secure, dependable investments. A bond’s yield is the annual rate of return, and changes in bond yields, in turn, impact the fixed-rate mortgages banks offer.

Should I select a fixed-rate or variable-rate Toronto mortgage?

Several factors can impact the type of Toronto mortgage rate you select:

  • Do you want a set mortgage payment (fixed-rate), or are you willing to take a risk (variable-rate) and hope that interest rates either go down or at least stay the same?
  • Do you have the means to afford an increased mortgage payment if rates shoot up? Many homebuyers bought at the market’s peak with low rates and then discovered they were struggling to make payments later on.
  • Do you think the Bank of Canada will continue to raise their overnight rate, and will bond yields go up or down?

Not sure what to do? We’re here to help!

At Northwood Mortgage, we can:

  • Tell you about the different Toronto mortgage rates we offer.
  • Talk to you about your budget and discuss which type of mortgage rate makes more sense for you.
  • Shop around to ensure you get the lowest rate available!

Don’t let the unknown stop you from looking into purchasing a Toronto home. We’ll be with you every step of the way and have no hidden fees or charges.

Call us at 888-257-8310 or contact us online to learn more about how to get started with obtaining a mortgage today!