Should you speak with a broker at mortgage renewal time?

There are a lot of mortgages coming up for renewal in the next 12 to 24 months, that will have a shocking impact on the mortgage holders. Why am I saying that?

Let’s take a look at the mortgage market in Canada, and the economy in general over the last 3 years.

We had low inflation, hovering from 0% to slightly over 2% for years, until April 2021 when we saw a jump to 3.4%, and steadily increasing on a monthly bases until it’s peak in June 2022 at 8.1%. There has been a slow decline in inflation since that peak, and standing at 3.1% in October of 2023.

We had a robust real estate market. In almost every part of Canada, properties were selling with multiple offers, and for prices well above the listed prices. Money was cheap, with fixed mortgage rates ranging from under 2% to slightly over that.

The result was increased purchasing and refinancing activities. And many of those mortgages will be coming up for renewal in the next 12 to 24 months.

It is now beginning of December 2023. Current 5 year mortgage rates are ranging from mid 5% to little over 7% for fixed rates, and variable rates ranging from lower 6% to a bit over 7%.

Prime is currently at 7.2%. In a few days Bank of Canada will have their last interest rate meeting for this year, and based on the overall inflation, bond markets and employment numbers, it is a wide expectation that there will not be another rate hike. Everyone is hoping for a rate cut, but that might not happen until 2024. According to the financial news outlets: “Investors are now fully pricing in a 25 bps rate cut by April (2024), a 75 per cent chance by March and even a 20 per cent chance by next week.”

So what is a smart thing to do when you are facing a renewal, and your lender sends you the renewal paperwork?

First, we need to understand how the renewal process works. We receive a renewal notice from our bank. Many of us will look at the renewal letter, and simply sign it, accepting the offered rate, trusting that our lender’s quoted rate is fair compared to where the economy and the current rates are. After all, there is an established banking relationship that has spanned over years, if not decades. You know the people working at your local bank, you see them regularly for deposits, withdrawals and other banking needs, so why question anything now? They would have offered you better rate if they could, right?

Well, maybe.

The only way to know if there are better options is to ask questions, and consider any available options.

It’s one thing to qualify only for alternative or private mortgages with limited renewal options, but it’s a completely different scenario when you’re a well-qualified borrower.

These well-qualified borrowers should consider having a conversation with a mortgage broker to see whether to stay with their current lender, or switch to another lender, obviously for better rate and better terms. Naturally, questions should be asked about costs, penalties, prepayment options, the list of questions is endless.

It is an unfortunate fact that despite being well-qualified borrowers, not all lenders offer their existing clients competitive rates at renewal time. That’s why it’s so important to speak with a broker at renewal time.

Given the market’s complexity, the competitiveness of products and rates, working with a broker to identify the most suitable mortgage at maturity is as important as deciding on which mortgage to get when buying a home.

If your mortgage is renewing in the next 3 to 4 months, don’t hesitate to contact us at Ltd. We can provide a detailed review of your current offer and explore potentially better options tailored to your needs.

At Ltd, we are constantly looking for ways to provide helpful advice related to mortgages, current mortgage rates, and more. If you have any questions or need further assistance, we offer a complimentary no-obligation consultation. Feel free to reach out to us at (519) 252-9665 during our regular business hours. Alternatively, you can fill out our contact form, and your message will be promptly emailed to us. We value your time and inquiries, and we make it our priority to respond to all messages within one business day. When reaching out, please provide us with your contact details, a brief overview of your mortgage needs, and the most convenient times for you to have a consultation. We look forward to assisting you with your mortgage.

This article was brought to you by Ltd., a mortgage brokerage that is licensed with the Financial Services Regulatory Agency of Ontario (FSRA), which regulates businesses in the financial sector. The Principal Broker Sash Trajkovski has over 20 years of real estate and mortgage experience in the Ontario marketplace. You can verify our licenses by visiting the following links from FSRA’s website: our corporate license and Principal Broker license. Our mortgages services are available to all residents of Ontario. If you’re in Ontario and looking for more personalized advice and information, consider booking your Complimentary Consultation today, and let us help you understand the details that will guide you on your path to a suitable mortgage solution.

Disclaimer: Please note that this information is current as of the date of publication and is intended to be general in nature. It is not intended to provide legal, tax, financial, or other professional advice and should not be relied upon as such. Always consult with a professional for advice tailored to your individual circumstances.

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