Column: What to do with rising interest rates

Kelowna columnists say a big concern is what type of interest rate is for you

We see a lot about future changes from the Bank of Canada regarding tightening lending rules, Canadian indebtedness and interest rates.

We have all heard of the burgeoning debt loads, the reason for the tighter lending rules. Our main concern, as mortgage professionals, is to guide you, the home owner and potential first time buyer about the pros and cons of mortgage interest rates as to how they apply for each individual client.

One of the major dilemmas facing those who are first time home buyers, upgrading to a larger home, facing future renewals, renovation and consolidation mortgages is what type of interest rate is for you.

There are varying types of mortgage interest rates in financial land. Variable rates- those with no set interest rate for a specific period of time; closed mortgage rates – guaranteed interest rates for set period of time; open mortgages with either variable interest rates or fixed rates from six month to one year; credit lines – open revolving credit up to 65 per cent of the value of your home.

Over the past several years it has been variable rates as the borrowers’ choice but, due to recent interest rate hikes, the spread between variable interest rates (prime plus or minus the financial institution’s prime rate of 3.20 per cent) and closed, fixed rates may be approximately 60 to 80 basis points. For example: a variable rate mortgage can be as low as Prime – .80 per cent (2.40 per cent) and a five year fixed as low 3.04 per cent. You can also opt for a 10 year closed mortgage rates in the 4.09 per cent area but some feel that may be high compared to the variable rate mortgage.

As in investment, we must rate the risk to reward in choosing a mortgage interest rate. From what we read, and our experience in mortgage lending, interest rates have risen and, if you are in a closed variable rate or credit line (both on fluctuating interest rates based on financial institutions’ prime rates), you will have to carefully watch that prime rate.

Each individual lending situation carries its own characteristics so each application a mortgage professional takes has to be viewed with the borrower’s best interests in mind. For example: 1.) what are your risks to interest rate fluctuations?; 2.) what are your plans for the future?

That is, are you inheriting funds; expecting a large sum of money; planning on moving in the near future and many different scenarios. There are many other scenarios that we have not discussed here but, should you have any questions regarding your future renewal, home purchase, renovation, investment or refinancing please call us and we will gladly sit down with you to discuss your options.

Of Prime Interest is a collaboration of mortgage professionals: Darwyn Sloat: Phone: 250-718-4117 or email at: dsloat@creativemortgage.ca; Trish Balaberde: Phone: 250-470-8324 or email at: trishb@creativemortgage.ca; Christine Hawkins: Phone: 250-826-2001 or email at: christine@creativemortgage.ca.

Just Posted

Gold for Kelowna’s Kelsey Serwa

Medals will be handed out tonight in women’s ski cross with Kelowna athlete involved

RCMP search for missing couple

The couple was last seen leaving their home in Kelowna for Kamloops

Arson considered for Rutland house fire

The fire on Argyll Road last week destroyed the home’s carport

Crime Stoppers search for Lake Country suspects

The Central Okanagan Crime Stoppers need your help in finding perpetrator

Less crime in Lake Country

There was a decrease in crime in 2017 compared to 2016

VIDEO: B.C. superfans soak in 2018 PyeongChang Olympics

Trio, including two from the Okanagan, have been cheering on Summerland Olympian Kripps among others in Korea

Great Big Sea fame shares story of abuse, recovery

Séan McCann performs in Vernon March 4 and Kelowna March 5

More snow expected on the Coquihalla, Highway 3

Environment Canada says five to 10 centimetres will come down between Friday and Saturday mornings

New charges against ex-Trump campaign associates

More charges were laid Thursday against President Donald Trump’s former campaign chairman and his business associate

Man accused in death of Winnipeg teen Tina Fontaine not guilty

Raymond Cormier was accused of killing Indigenous 15-year-old and dumping her body in the Red River

Alberta drops B.C. wine boycott, Notley says Horgan ‘blinked’ on pipeline

B.C. government announces court reference on proposed diluted bitumen restriction

UPDATE: Northern Health dealing with lack of 121 registered nurses

Auditor General says officials need to improve internal management, track effect of new policies

B.C. businesses say new health tax will raise prices for consumers

Province announced that MSP will be gone by 2020

Barnful of ducks die in early morning blaze

The cause of the fire is unknown

Most Read