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Five-year fixed mortgage below three per cent
Apr 10, 2014
There’s nothing like getting the spring market going with a mortgage rate reduction under the three-per-cent threshold. Newspaper headlines a few weeks ago announced BMO is offering a five-year, fixed-rate mortgage of 2.99 per cent. As expected, other financial institutions followed suit with their own below three per cent offerings. 
The under three-per-cent rate was justified on the basis that bond yields have been coming down. Also not surprising is that banks are fighting for market share, especially with a slow start this year in housing sales in many markets due to winter’s icy grip keeping spring buried under snow.
Interestingly enough, a report from the same bank that grabbed the national spotlight at the end of March, hints that it may be the last hurrah for some time to get such an attractive fixed rate. 
BMO’s chief economist Douglas Porter thinks an improving U.S. economy, as well as bond yields that will rise along with accelerated growth, will inevitably put pressure on fixed borrowing costs. Next year is widely anticipated to be the year that both the U.S. Federal Reserve and the Bank of Canada raise interest rates.
The report entitled, Mortgage Choices: The Fix(ed) is In, explained how as bond yields rise, the cost of funds for lenders also rises; therefore, putting upward pressure on consumer and business borrowing costs. This also includes long-term mortgage rates. So even if variable rates take some time to climb, the BMO report forecasts we may again not see such low fixed rates anytime soon. 
Speaking to buyers giving serious consideration to opting for a fixed rate over variable, the Report states: “For those who don’t have much financial flexibility, and would run into difficulty from a pronounced upswing in interest rates (typically first-time buyers), any potential extra cost for peace of mind now appears to be a price well worth paying.”
The Canadian Association of Accredited Mortgage Professionals (CAAMP) released research earlier this year on Canadian consumer sentiment regarding taking on a mortgage and debt. Here are some of the highlights of this survey conducted by Maritz Research:
• Eigthy per cent agree mortgages are good debt.
• Eighty-four per cent say real estate is a good long-term investment.
• Sixty-nine per cent are optimistic about the economy over the next 12 months.
Most Canadians are expecting more stability or slower growth in house prices.  Optimism in expecting higher house prices over lower ones is the highest in Alberta (more than double the respondents expect increases over those who expect decreases) and B.C. The lowest expectations are in Atlantic Canada and Ontario.
Another important issue covered in this survey was how Canadians feel about homeownership. When asked to choose the emotions that best represented how they feel, three out of four respondents said they are comfortable, while one-half said they are content. One in four said they are secure and/or happy. Only one in 10 or fewer indicated negative emotions, such as stuck or stressed.
A home is the largest investment made by most Canadians in their lifetime. Real estate markets are local, so be sure to call your REALTOR® and a local mortgage broker about what mortgage you qualify for and what your options are with regard to a fixed- or variable-rate mortgage.  You need to be talking to the professionals who can give you the advice you need,  so that you will be comfortable with the “good” debt you take on when buying a home.