Investors Group has joined the mortgage rate-cutting fray, introducing a jaw-dropping 1.99% rate variable rate to the market. It’s one of the lowest variable rates ever seen in Canada (our site saw a dip as low 1.60% in May 2010), and sure to catch the interest of house hunters in what has already been a competitively-priced spring home-buying season.
This promotional three-year rate, which is priced 40 basis points below the next lowest 3-year variable offering, is available only for new Investors Group mortgage customers, and it’s not clear at this point how long the deal will be offered.
There are significant savings to be had with a rate this low. Assuming that variable rates do not fluctuate over the next three years, homeowners could save $190 monthly on their mortgage payments, compared to the lowest bank-offered 3-year variable rate of 3%.
Let’s break down the numbers*:
*Source: RATESDOTCA Mortgage Calculator
Variable rate mortgages, also called floating rate mortgages, have been priced at record lows since 2010, as the Bank of Canada has kept the nation’s central rate and Prime rate at 1% and 3% respectively as a post-recession recovery tactic.
Economists and mortgage pundits have speculated that the BoC has nowhere to go but up with central interest rates, and feel a variable increase is (eventually) inevitable. However, while Canada weathered the recession better than most, key economic drivers like our exports industry and big business investment, just haven’t caught up to their pre-recession levels. Combined with steep discount retailer competition, this has spelled bad news for our limp inflation levels, which haven’t hit their growth benchmarks for several years in a row - one of the Bank’s requirements for a rate increase.
RATESDOTCAs own expert Mortgage Rate Outlook Panel confirmed their doubts of a rate increase in the short term, calling for unchanged rates as far into the future as 2016 - a stance also taken by the BoC governor himself, Stephen Poloz.
While it’s impossible to predict how interest rates will perform in the years to come, there is a good chance buyers will continue to enjoy low floating rates until Canada’s economic recovery sees real progress. Should the forecast of stability until 2016 prove accurate, buyers would have access to payments at 1.99% until at least the last year of their mortgage term.
At press time, it is unknown how long Investor Group will offer their newsmaking rate. Is it worth rushing into the market to secure such a bargain?
Consider the following:
Not sure if your budget could hold up to higher mortgage payments? Check out our Mortgage Affordability Calculator.