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Mortgage Costs are Less Than the Rate of Inflation for the First Time in 40 Years

October 11, 2021 | Posted by: Marc Crossman

Nobody likes to pay more for their day-to-day living expenses, so last week’s news of July’s eyebrow-raising 3.7 per cent inflation rate caused quite a stir. According to Statistics Canada, it was the largest annual spike since October 1987.


A lot of attention has been paid to the rising costs of food or used cars, as well as in stocks and speculative assets. But Canadians, being as obsessed as anyone with real estate, also zeroed in on the fact that, for the first time in over 40 years, the cost to carry a mortgage was less than the rate of inflation.

What should homeowners do?

The current ‘free money’ environment does offer opportunities. For instance, current borrowers should consider locking in at the lowest rate on their debt. Borrowers with variable-rate mortgages will pay less to penalties — the equivalent of three months’ interest — and either save money or get a bit of a guarantee by locking in for the next five years with an ultra-low rate.

Outside of mortgages, borrowers should also consider:

  • Refinancing loans
  • Consolidating debt
  • Transferring high-interest debt, such as credit card balances, to lower-interest loans


What should homebuyers do?

Those eager to get into the housing market during this easy money phase will need to do their due diligence:

  • Don’t over-extend and buy at the top of your price range. If you over-extend just to get in then at the time of renewal, you could face housing costs that doubled or tripled, should rates continue to rise.
  • Shop now for a pre-qualified mortgage rate and get the longest possible rate-lock guarantee that the lender is willing to offer in writing.
  • Consider a fixed-rate mortgage, which will shelter your housing costs from inflationary pressures over the life of the term.
  • Consider using pre-payments to repay the principal debt faster. You could save tens of thousands on interest payments over the life of the mortgage.

As always, contact us today to find out more or to take advantage of these lower interest rates, we’re here to help!

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