price Mortgage

The economy and its effect on the price of the Mortgage

The economy has a strong direct effect on mortgage rates in Canada, but if the economy will affect your mortgage depends on the type of mortgage you have. Some loans will increase or decrease depending on the prevailing interest rates or may be linked to an economic index. Others are bound by contract to remain unchanged for the duration of the loan.

Mortgage rates in Canada are generally determined by the prime rate for variable rate mortgages and adjustable, and the bond market for fixed-rate mortgages. Even if lenders can charge their own rates for mortgages, are usually related to some kind of index in some way.

The prime rate is the rate that lenders charge their very best customers, usually institutional clients. Normally, the prime rate was at least a point or two higher than most mortgage rates. Because the economy has been sluggish over the past two years, the Bank of Canada has maintained low Prime Rate.

Similarly, government bond rates have been low, so that fixed-rate mortgages are low. fixed-rate mortgages in general, the bond market, but they are usually just a little 'back in to change rates. But, historically, mortgage rates have followed the bond rates. Bond rates are a financial market that is subject to market demand and will rise and fall according to demand. These markets are international and institutional in nature, and the weakness or strength of the economy will affect the rate of bond.

With the world economy is relatively weak, the bond is too low. In fact, mortgage rates in Canada are at historic lows. A short-term fixed rates are below 5% and is low for at least a year.

In a fixed rate mortgage, the mortgage rate will remain the same for the duration of the loan, usually 2-5 years. However, the rate can go up or down, depending on the economy, when the mortgage is renewed. There is no requirement that you renew your mortgage, however, and you can refinance your mortgage with another lender at the end of the term.

An adjustable rate mortgage increases or decreases with the prevailing mortgage rates. Your monthly payment will increase or decrease with the prevailing interest rates. In an adjustable rate mortgage, the interest rate will change, but the monthly payment will remain the same. The amount paid to the principal balance of your loan will change.

With interest rates at historic lows, many are trying to lock in low rates with a fixed rate mortgage. Others believe that the rate will remain low, and will initially lower the level of a variable rate mortgage or variable.

When you consider refinancing, especially if you have a fixed rate mortgage, you should check prepayment penalties and determine whether it is economically feasible to refinance before the end of the term. If you are nearing the end of the mortgage, however, you should seriously consider shopping for the best mortgage rate possible.