“The general trend toward higher rates, and away from those extreme lows we saw at the turn of the year, is likely to be the dominant theme over the next year as the global economy and global financial markets heal,” said Douglas Porter, deputy chief economist at BMO Nesbitt Burns. 

It's important for home buyers and mortgage holders to understand that there are two tracks for interest rates. One is the bond market, where investors tend to sell bonds when they see higher inflation and interest rates coming and to buy bonds when they see rates falling or are petrified with fear about a global financial meltdown. That's what's happened with bonds in the last few months of 2008 and earlier this year.. 

The second rate track is the one the Bank of Canada influences through its overnight rate, which in turn has a major impact on the prime rate charged by the banks to their best customers. The prime, in turn, is the key to variable-rate mortgages. Right now you can get a variable rate mortgage at prime of 2.25%...speak with me if interested and I will make arrangements for you to meet with my mortgage specialist :-)

Lenders offering variable-rate mortgages generally allow customers to lock into a fixed-rate mortgage at no charge, but when breaking a mortgage there is a penalty involved when moving to another lender. However, to weigh out the pros of moving, the new lender is holding a five-year rate of 3.89 per cent for 120 days, which means he can enjoy the ultralow rate on his existing mortgage a bit longer before jumping into the security of a fixed rate. 

There's good reason to use the same strategy if you're breaking a fixed-rate mortgage. If rates rise during the 90- or 120-day period your new rate is being held, the penalty you'll have to pay should decline. Remember, these penalties are tied to the difference between the rate you got originally and rates of the moment. 

There seems to be a current trend among lenders reducing the spread on variable rate mortgages across the board which most likely indicates a hike in the price rate. Possibly a wise idea would be to lock into a fixed rate mortgage now before the rate increases so if you have yet to own a home or a mortgage and are in the process of thinking about a purchase, now is the time when the rates are lowest. Your preapproval will be good for 90 days and if you have not found the right home by the end of the 90 days, you can make arrangements to extending the preapproval by contacting myself or your mortgage specialist.