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If you own a home, have a mortgage, or want to purchase or sell a home, the upcoming higher interest rates are going to impact you in some capacity. This is just the start of what is about to come in 2022 so now is the time to review and take action if required.
1. Variable rate mortgages. If you have a variable rate mortgage, an increase in the Bank of Canada overnight rate and subsequent prime rate, will add more to the cost of your mortgage. Now may be the time to review your current mortgage and see if a switch to a fixed rate mortgage makes sense.

2. Fixed rate mortgages. There is a correlation between fixed and variable interest rates. It may be advantageous to break your current fixed mortgage early, even if you incur a penalty, to lock into a lower rate or longer term mortgage.

3. The cost of financing a relocation. If relocating, the sticker price for your new home is not the actual cost of your new home. Let’s assume a modest purchase price of $600,000 with 20% down or a $480,000 mortgage. Amortized over 25 years, the total cost of your home at consistent current fixed rates of about 2.9%, after financing is $794,106. If rates were to jump just 1% in 2022 to 3.9%, the cost of that same $600,000 home is now $869,684. Yikes.

4. Less qualified buyers. If selling your home, higher rates means less qualified buyers at your price point due to their limitations in obtaining mortgage financing. This should result in a softening of the real estate market and longer wait times to sell your home.

5. Economic change. Increasing interest rates are used as a means to slow down the economy. Less investment, less job creation and less price appreciation are examples of economic conditions that may directly influence your job stability, and real estate decisions in a climate of higher interest rates.

It costs you nothing for us to review your current situations, and provide some options for you to consider. Act now as any delay (as we quantified in our third example) could be an expensive mistake. We are here to assist you. At the very least we can confirm you are currently well positioned and comfortable with what lies ahead.