With the real estate market being sizzling hot, and mortgage rates at all-time lows now is the time to become a first-time homeowner. Though as many young professionals are boarding the boat for this new adventure in their lives, some are concerned that interest rates are about to change. What we  have seen in the last few years, however, is a steady course when it comes to those low-interest rates sticking around and homes buying bought and sold, sometimes before they even hit the market.

So what really impacts fixed interest rates and what would cause them to change?

Fixed mortgage interest rates are derived from the yield or the amount of money that is made from Canadian government bonds. Right now as our economy in Canada is stable and strong in comparison to countries like Europe, there is a higher demand to purchase Canadian Bonds as a form of investment.

But what does investing  have to do with your mortgage?

Essentially the Canadian government is the largest influencer to the banks and lenders that lend you the funds for your mortgage. In order to determine what the fixed interest rates for the amount loaned should be, the banks align those rates with the rate of return on the yield that the government is seeing from Canadian bonds as they are the benchmarks in the industry. Mortgage rates and bond yields similarly represent the minimum rate of return on their original investment after lending you the funds.

Why are interest rates so low right now?

Canadian real estate investors are benefitting from low-interest rates right now as there is a high demand for Canadian bonds from the investment world. As the European economy in the past years has declined due to large amounts of debt, investors that had been investing in the European market have shifted their investments into Canadian bonds. Government Bonds are one of the most liquid and least risky investments to make as these investments are guaranteed by the government, making them a safer investment to make in countries with strong economies.

What would make interest rates increase?

Interest rates could increase if the demand for Canadian government bonds was to decrease as the government yield from those bonds would decrease as well.

If you are looking to become a new homeowner and would like to get a head start on taking advantage of today’s rock-bottom interest rates, feel free to give me a call at 705-315-0516. In a few short moments can we take a look at your mortgage options together and start the process of getting you pre-approved for a mortgage, for the home of your dreams.