My favourite Real Estate Economist, Will Dunning, posted his March updates. Here is the link to his page: https://www.wdunning.com/housing-market-digest
Will is a little pessimistic and optimistic, depending on how you look at it. He believes mortgage rates have been too high for too long, and this is beginning to show up in a quieting of the real estate market, with resale volumes settling 18% below the long-term average on a per-adult basis. People are reluctant to sell their homes at a discount, so they hang on. But if rates don't come down sharply soon, many households will be in trouble because of carrying high variable rates and/or renewing at 5-year rates "far above the neutral rate," as Will Dunning puts it. Anecdotally, despite the hostile rate environment, I am seeing more subprime mortgage interest than ever.
The good news is that more forecasts predict Canadian mortgage rates will begin coming down soon. However, as John Maynard-Keynes famously said, "Markets can remain irrational longer than you can remain solvent."
So What's a Mortgage Holder to Do when the time comes to Renew?
This question is a real "Catch-22!" because if you lock in for five years now, you will benefit from the lower rate of the day (currently just under or above 5%, give or take, depending), but you will not participate in the sharp mortgage rate drops that will potentially come. The interest rate differential early refinance penalty is designed to take the gain out of refinancing until the end of the mortgage term. It still might be worth paying it, but we'd have to do the math.
But if you stay with a Variable, you will be volunteering for a higher rate immediately (Variable rate mortgages are in the 6.3% range for renewals now) and running the risk that the rates do not fall hard and fast enough to make your sacrifice worth it.
As the last few years have demonstrated painfully, I have no crystal ball on rates, but the 3-year fixed rate in the 5.5% range seems like a good compromise to me.
The best thing to do in all cases is to "do the math." Call me or use the link below to schedule a meeting to explore your best options.