Historical Low-Interest Rates Drives Real Estate Activity

Scott Gingles, President and CEO of Nest Mortgages, joins Ryan Lalonde and Suzana Goncalves in this month’s episode of our Pre-sale Pulse Trending Topics to discuss Canada’s record-low mortgage interest rates.

“Historically low-interest rates are something we have had access to in the last year. The government did everything they could heading into the pandemic to backstop the economy, which impacted bond yields, driving them to levels that we have never seen before,” states Scott.

Fixed and Variable Rates?

With record low-interest rates a trending topic across the Lower Mainland, Scott addresses the question that many homebuyers are asking:

“People are starting to enquire about fixed vs variable. We can still access variable rates at approximately 1.5%. Five-year fixed rates are climbing closer to a 2% threshold. It’s a question we face a lot of the time, whether to go variable or fixed. If you are an established buyer and can tolerate some risk, variable is typically the way to go.”

“In regard to fixed, it’s about risk tolerance. If you are certain you are going to be in your home for the next five years and you’re not going to be making any changes, fixed might be the way you want to go. Right now, we can access a fixed rate of 1.79% from a high ratio purchase, and that’s an incredibly strong fixed rate,” Scott answers.

What about the Bank of Canada?

Suzana speaks to the concerns regarding whether or not interest rates may start to increase, and what this could mean for the average homebuyer:

“The Bank of Canada always talks about people over-leveraging or worrying about stricter guidelines on what you can qualify for. They want to ensure that, if interest rates do go up, people can still cover their mortgage. Given that rates are so low, is this something you think we need to be worrying about?” Scott assures that there are stringent processes in place to ensure borrowing is made a responsible transaction:

“There’s qualification and then there’s affordability. The rates are incredibly low and it makes it quite affordable for everyone. I would argue that lending and underwriting practices in Canada have been strong for some time. Even through this heightened activity and borrowing, we are still qualifying at the benchmark, which is almost 3% higher than what fixed and variable rates are today. We are qualifying at 4.79% today. I think that the responsible lending practices are still in place and we are in good shape in terms of affordability and borrowing.”

Get expert mortgage advice from Scott and his team by visiting nestmortgage.co

Read Scott’s latest Article summarizing updates from the Bank of Canada: nestmortgage.co/bank-of-canada-summary

For the latest real estate market data on Greater Vancouver, watch the latest video featuring Ryan Lalonde and Suzana Goncalves.