Will it ever end? The Canadian Centre for Policy Alternatives just came out with their report that states ”Canada is experiencing, for the first time in the last 30 years, a synchronized housing bubble across the six largest residential real estate markets in Canada.” You can find the full 24 page report at www.policyalternatives.ca.

The author of the report, David MacDonald, provides three different scenarios a) a market correction through straight pricing deflation of homes b) a deeper and longer crash over several years with prices dropping each year, or c) a rapid and steep decline similar to the US. The biggest problem I see with this report is that it is grouping all the cities together and all having the same issues.

Due to Canada’s size and diversity, what happens in one region doesn’t necessarily affect another. Alberta as an example always lags behind other provinces initially as overall economic growth increases. Then due to our energy based economy it surges above and beyond the other economies after the demand factor increases. Ontario on the other hand often starts strong due to increasing manufacturing. As for specifically Vancouver, it seems to operate under its own set of universal laws as there is no way people can afford to buy homes there, yet it continues merrily along.

Now, having said that, we are also all tied together with certain aspects, such as mortgage rates, which David also says will play a factor. I absolutely agree with him that if mortgage rates return close to historic norms too quickly it will have a dramatic affect on affordability. This is why I have been surprised by the previous two rate hikes the Bank of Canada already instituted this year. It’s also something that the finance minister is paying very close attention to at this point.

They are very aware that if they continue to consistently increase rates, even at a slow pace, it will dramatically affect the entire economy.  As I have pointed out in previous articles, Canada had been the only G7 country to increase rates and we were only able to do so due to our quick recovery from the global slowdown. This was predominately due to many of the economic policies Canada had in place along with our stricter lending practices. Many other mortgage rate watchers, as well as myself, believe that if we do see further increases they will be very minimal and rates will stay very close to where they are currently at for a while. The caveat being if the economy starts to grow like crazy, increasing rates will just keep everything in balance.

Overall, he makes many good points and provides several possible outcomes. The unfortunate points being he doesn’t look at any of the positive signs we see out there which point to the market possibly dropping still a bit more, but regaining strength as we move into the end of 2010 and into a positive looking 2011.

Just to close off, the same day the above mentioned report came out, a report from C.D. Howe also came out. It took the stance that there is no indication that Canada will suffer a US style housing crash. Also a good read, it just didn’t get much press because it may perhaps have been to positive and positive headlines just don’t sell!

It sounds like this headline is showing up all across Canada. Variations of this headline have been triggered by a new report from the Canadian Centre for Policy Alternatives. In the report they talk about six major centers (two in Alberta!) that are in a precarious position. (links to the reports are at the bottom of the article!)

I was writing an article about this for my weekly Real Estate column at the Chestermere Anchor when I found the following video from Peter Kinch. Peter is one of the top ranked mortgage brokers in Canada, and in the video he presents his view on the subject.

Also of note, he brings up the other report that just came out from the C.D Howe institute report that says there is a low risk of a US style housing burst. Basically the exact opposite of the other report. Also strangely enough, the C.D. Howe report didn’t make much news in the headlines! Anyway here is the video and I will probably have my post about this up some time tomorrow.

**Give the player a couple of seconds to start after you click the arrow!**

Oh, one more quick note, the next Bank of Canada rate announcement is due out on September 8th, if you are keeping track!

Links to the Reports:

C.D. Howe : Not Here? Housing Market Policy and the Rick of a Housing Bust

Canadian Centre for Policy Alternative: Canada’s Housing Bubble, An Accident Waiting to Happen

Want to know how to waste two hours of your time? Get subpoenaed as a witness and then discover that the officer neglected to update you that the court date changed, that’s how.

What a pisser as I had things I needed to get done and pushed them off to do the right thing. What’s more aggravating is this same officer never returned one of my initial calls or emails when this first started a year ago. It seems to be an ongoing saga.

I understand the police are busy, I understand they are often understaffed, but here we have a chance to put a deadbeat away who stole a vehicle at knife point and we’re screwing around. Anyway, I’ll have more updates after the 1st of September when I find out the new and updated court date!

OK, just so you know, this isn’t even an eviction. I had a tenant “allegedly” steal a vehicle from another tenant last year at knife point. I know, I get to deal with great people.

Worse yet, this was part of my pilot project to help young kids get off the street by putting them in some of my shared accommodation properties. Now just to add some perspective to this, I am not Mother Teresa, or even close!, part of this was to help fill rooms and some was indeed to try and help people who needed it.

Quick recap on the project, out of 11 tenants, I evicted or assisted nine of them to leave, the other two will never be allowed back. These were 18-24 year old kids who wanted financial assistance, housing assistance and typically had problems at home. The problem with the system I see is they were never made accountable.

They didn’t have to work for their money, they didn’t have to show up for job interviews, they didn’t have to get up in the morning. Also since they didn’t pay for anything and new housing would be found for them, they also weren’t responsible for anything. No smoking, sure, whenever Bill wasn’t around, no overnight visitors, sure whenever Bill wasn’t around. Anyway you get the idea.

Anyway, I will post more either late tonight or tomorrow as the story unfolds!!!

In further efforts to streamline the process and to ensure I can get posts out more efficiently I am making a few changes again to the way I send out the posts.

Unfortunately it does require everyone to re-register, fortunately I have a simple form that will make it quick and easy.
 

 
To make sure you are rewarded for having to re-register I am putting together some more great information to send out to all the subscribers that register through this form. My apologies for the extra steps you take, hopefully the free info will make it all worthwhile and you should see it in your inbox over the next few weeks.

Remember this info will only be available initially to the newly subscribed, so please register just once more!

Thanks,

Bill

Revelations – Something revealed, especially a dramatic disclosure of something not previously known or realized.

Definition from Answers.com

I was talking with a friend this morning (you know who you are and thank you!) about how angry I am with people lately. Last week I had a former tenant send me an email who discovered a $1,295 judgment on his credit. He stated that I had lied to put this on his credit and he had witnesses about black mould in the property and was considering consulting a lawyer. It pissed me off a bit, so I suggested he go ahead and proceed as I would then have his current address and could go after all the additional charges I didn’t have in the judgment.

It irritated me that he tried to get out of paying originally and when it finally caught up to him, he was still trying to get out of it.

Yesterday I met with two guys from out East who were here to do some promotional work with the Calgary Herald. They called last week and wanted me to hold two rooms for them. They were persistent and very concerned that I had to hold them, so I did. They were supposed to call Saturday to confirm time of arrival, but of course they didn’t so I didn’ t expect them.

Then they called Sunday to say they were here, the rooms weren’t quite ready, so Karen and I had to rush over and prep them before they got there. When they did show up, they didn’t have the money with them for the rooms, and they wouldn’t be able to get it all since they had to withdraw money for traveling earlier that day and had daily limits. Yep, this irritated me too, especially since we had the conversation about costs a week earlier.

So they ran to the bank, came back and wanted to talk to me, in private. So we go outside and they tell me they thought it was too much. They wanted a discount of about 30%. They explained if they ended up staying longer they could rent as apartment for less. So to recap, I held two rooms, rushed to prep them for them, gave them the benefit of the doubt and was letting them only pay part of it up front and now they wanted a further discount. I was furious. I suggested they go get an apartment and walked away leaving them to drive off.

What I’ve been noticing over the last month is I’ve been letting incidents like this get to me. It’s just been a series of little pin pricks that get more and more and more and more and more annoying. The phone call this morning was part one of the revelation that this was happening.

You have to wait until tomorrow for part two!

Here it comes again! It seems as if every street you drive down lately has another house listed for sale with the big shiny Real Estate companies sign out front. Aren’t we supposed to be recovering and home prices were set to rebound? Isn’t the recession over?

Instead, here we are approaching inventory levels we haven’t seen since spring of 2008! That’s when we peaked at around 15,000 listings in Calgary and area. This overstock of properties for sale ultimately led to values decreasing even more and causing a further slowdown in a weak market as properties were everywhere and buyers had little competition.

So where are we sitting now? Well as we hit the end of June, we were sitting with a numbing 14,066 listings on the MLS. That is almost 5,000 listings higher than the same time frame last year! To make this even more frightening, sales are down by over 900 properties from June in 2009. So, once again, does this mean it’s time to panic?

If you are prone to panic, I guess now is as good a time as any, although I believe this will be short term and you might be getting anxious over headlines only. The bad news is prices are going to get pushed down marginally as the extra competition among sellers mounts; the good news is that homes are still selling if they are priced right and my Pollyanna crystal ball still shows considerable upside for the fall.

I’m not expecting prices to plummet a huge percentage; they will most likely come down only 2 or 3% short term as the market once again stabilize and buyers take advantage of frantic sellers. Based on average home prices this should be around $8,000 to $12,000 on a property, which shouldn’t be cataclysmic, unless you were close to 100% financed. Also, by short term, I am not expecting this to last much longer than the summer and then to see another surge of increasing prices again this fall.

You might ask at this point, why I am expecting it to rebound so quickly. My thoughts are that the market slowdown is more directly related to the huge surge in the markets earlier in the year rather than anything else that’s currently taking place.

If you look back to February, March and April this year, there was significant uncertainty how the new mortgage rules would affect home buyers and there was a strong feeling interest rates would be increasing very shortly. This pushed a larger than normal amount of buyers into purchasing sooner than they planned in order to take advantage of low interest rates and easier qualifying.

With this large portion of both first time buyers and home owners being suddenly removed from the market it was bound to slow down as buyers disappeared. Then to top it off, we added in the small increase in interest rates and it managed to push even more buyers to the side as they re-evaluated whether to purchase or wait. Is it any wonder then that fewer homes are selling?

So, here we are in July and people’s thoughts have moved to enjoying the few beautiful days we have during our summertime and less to a new home. However, by the end of summer, this will all change. We should see further stabilization in the economy, allowing more people to contemplate purchasing a new home without the uncertainty of potential job loss, prices will have decreased, making it more attractive and affordable, interest rates should remain steady and the overall mood of the Canadian economy will be once more optimistic. This should plant the seeds for some steady growth during the fall and a great time for the market!

Or at least that’s how I currently see it, anyone else have some alternative viewpoints?

It seems like wingnuts are flying off the shelf these days and I am receiving even more content for a potential book about tenant stories. Here is the email I received the other day in response to one of my weekly rental ads on Kijiji;

I want your condo for 2 days, i m planing on having a party. It’s going to be my Birthday Bash so yeup
let me know if you agree, also let me know how much for a day & i’ll let you know when i want it.
email me asap Please and thank you

So, what do you think, should I contact the person? Seem like a winning solution? Just to show how confounding this is,below is a section from my ad,

To ensure a great experience for our residents the property has the following rules in place;

• no smoking in the home
• no drugs
• no overnight visitors
• treat the other guests with respect
• no parties

These rules help create a safe quiet environment and also discourage the types of roommates we are sure you do not want to share a place with.

I highlighted a couple spots the potential short term tenant appears to have glossed over! Bottom line, I think I will take a pass and not bother to reply, I know, I could be throwing away money, but sometimes you just have to take a chance and pass on an exceptional offer!

Love to hear any stories from you!

With the recent mortgage rule changes and then following that the slight increase in the Bank of Canada’s prime rate, more and more people are sitting back and waiting to see how the Real Estate market will be affected. While the actual sales numbers are decreasing, there seems to still be a steady build up of new properties coming onto the market. This is causing us to tip back over to a buyer’s market, which brings back some of the old challenges for sellers.

Among these challenges are more aggressive pricing demands from buyers as more options or properties are available to them, more restrictive conditions and terms within the actual offers and longer closing periods putting the burden of extra payments on the sellers. So what better time is there to explain some of these additional challenges than now?

Let’s start with some of the tactics buyers use to get a lower price. The most obvious of course is the low ball offer. This is an extremely low offer thrown out quite often, just to test the waters and see how much the seller will negotiate. The counter to this, and to see if the buyer is serious, is to either refuse the initial offer hoping they resubmit an offer at a higher price, or to only reduce your price by a very small amount to see if they come up in price.

If you only reduce your price a bit and they only come up the same amount, they may be trying to move you to a midpoint between your prices. If this is acceptable to you, carry on nibbling downwards, if the midpoint between prices would be too low for you, try reducing a bit more in your second counter, but make sure you make it known you won’t be moving much from your last counter.

The second part of the buyer trying to reduce your price, involves making initial pricing concessions to you and then coming back after a property inspection demanding further reductions back. This can be another tricky area. If the price reduction is based on problems they were aware of prior to the inspection, it is most likely a pricing strategy, if it involves problems no one was aware of (such as hidden roof leaks, or hidden furnace problems), you have to decide whether you want to do the necessary repairs yourself, or concede the expense to the buyer in the form of a price reduction.

The final negotiating area to watch for involves condition dates and closing dates. Unless there are some special circumstances, the condition date shouldn’t be longer than seven business days and possibly less. The condition date is when any conditions such as home inspections or financing are removed and the contract becomes a binding sale.

If the condition date is two or more weeks away, your property would be off the market this entire time and then could still remain unsold. Long closing dates are also used by some nefarious individuals just to lock up properties and in some circumstances to renegotiate later for an even lower price when the homeowners are under more severe time pressures and have fewer options.

When it comes to closing dates, when the property actually changes hands, this is ideally two months or less. If the purchaser requires more time, you have to consider any additional mortgage payments you will be responsible for and you may be able to negotiate a slightly higher price due to this.

Remember these tips work best if you are not in a desperate situation and there is no guarantee that by following them you will sell your home. Every seller and every buyer have their own unique requirements and mindsets when they come to property transactions and what would be perfectly acceptable in one transaction causes another transaction to completely fall apart.

What better experience for a cautionary tale than to experience it yourself and then to tell others. Hopefully by sharing some of our experiences with you, it better prepares you if you also invest, or are thinking about it. So with that, here begins some of our current experiences with Real Estate investing in Calgary.

My wife and I have been actively buying rental properties and reselling properties we renovate since 2003, well before the economy took fire. So by the time things did take off, we were fairly well entrenched. The problem we ran into was financing and this is the brick wall many investors run into.

Once you start getting up to a certain number of properties, it tends to get harder to get financing from the main banks like TD, Scotia or RBC. Sure, you can still get them through the B lenders, such as GMAC, Exceed and numerous others of the same format.

The downside is that since they understand your options are slightly limited (from their side they are also dealing with riskier opportunities, but that is what their business model is built on) there are different challenges you face. These include higher interest rates on the mortgages, usually higher setup fees, you are restricted to using certain lawyers they have on their approved list (who also tend to charge more) and you generally have fewer options with terms.

These challenges and extra expenses however are worth it if the property analysis shows the property will work as a good long term investment. Thorough analysis of the property, evaluating the costs to purchase, operate and maintain the property along with properly managing it to make those numbers work is part of what makes successful investors. Unless the rug gets pulled out from under you that is.

When the economy turned in 2007, we actually stopped purchasing properties after picking up five in the spring and early summer and thought it was best to just manage the properties through the downturn and make what we had work. So here comes 2010, Canada seems to be recovering nicely, at least according to all the statistics, the housing market seems to be fairly steady and things are turning around.

This is the where the surprises start to come up for us. We have two properties whose mortgage terms are coming due this year. The first property we purchased in 2005 and came due at the end of May and the other is one of the properties we purchased in 2007 whose term comes up at the beginning of July.

Well much to our surprise and delight (this is meant in the most sarcastic way possible), we discovered that the lender, GMAC, has decided to get out of the mortgage business and are no longer accepting new mortgages. This has actually worked out for us quite well as we did purchase the property five years ago, we have sold it for more than we hoped for and we have one less property in our portfolio, but it could have been worse if we hadn’t held it for so long.

This brings us to property number two which we have only held for three years, bought just before the downturn and is now worth less than we originally paid. This property was mortgaged for us by Exceed mortgage at a higher rate of 6.8%, with huge fees, we never missed a payment and it cash flowed positively. Yet Exceed informed us a couple of months ago that they are not renewing many mortgages now and for the most part are getting out of rental properties. So we have either to get new financing or sell it to pay off their mortgage.

Currently this particular property is worth about the same amount as the mortgage due to the decreases in value. Although depressing, it’s something we can normally live through as it does pay for itself and creates positive cashflow. However to get new financing now, we would need to put down another 25% of the value and suddenly it becomes a poor investment with all the money stuck in the property. Our other option is to sell it, which is the route we have chosen.

Unfortunately, for us, since the values are down, after all the commissions for realtors, lawyer’s fees, and other miscellaneous expenses, we will have to pay out a considerable amount just to sell it. We understand there is a risk with Real Estate and because of the dollars involved sometimes it can be a costly risk.

It’s just disappointing to us that our position is being dictated by lenders who have profited so handsomely from us, who we never missed a payment to, and who originally targeted this segment of the market when it was most profitable for them and now are bailing when it doesn’t suit them anymore. Perhaps this is just a whine, but hopefully it is also a cautionary tale to others out there with mortgages potentially coming due.

So if you also have some mortgages coming due with some of these B lenders, have a plan in place in case you need to get other financing or if you need to prepare to sell a property. With potentially rising interest rates, another option may be to check in advance to see if perhaps you can take advantage of a blended rate and get an extension on the term at the same time! By being proactive you may get a great rate set up for several more years, rather than finding out in six months they too are getting out of the rental market!

Morgan Stanley just released a housing finance report detailing their findings on what is called the “Shadow Inventory” of homes. These are the properties that have yet to move into the foreclosure process, but typically haven’t made it there yet due to backlogs.

They believe close to 8,000,000 homes are currently part of this backlog and that it could take 47 months (that works out to one month shy of FOUR YEARS!!) before they would be all cleared off the market.

Would you honestly expect housing values in the US to reach any stable footing with this many properties expected to be released on the market at typically pennies on the dollar? The foreclosure rules are substantially different in the US than they are in Alberta and is another reason why it is so great being here!

You can read more about it here, Shadow Inventory Could Take Four Years to Clear

Just for some comparison, it does mention at the bottom that Barclay’s Capital feels there is only 4,700,000 million properties in the shadow inventory and Capital Economics believes it’s only 5,500,000. However you look at it, that is still a mess of foreclosure properties that will ultimately affect values for at least two more years to come.

So before you plunk down your hard earned cash on that “great investment property” in Phoenix, think about what it may be worth in two years!

The Royal Bank of Canada just released their latest affordability report covering the first quarter of 2010 and strangely enough, Alberta was the only province to actually show an increase in affordability throughout Canada. Every other province and region actually became slightly less affordable.

Just to clarify, we weren’t talking about double digit increases or decreases, but rather moderate changes, still though great news for Alberta. There really wasn’t to much out of the ordinary in the report, although they did point out that they believe we won’t see any excessive “unaffordability” coming up in the near future. This is due to a projected cooling of the Real Estate market across Canada after an unusually active first quarter.

From my perspective, the market may behave slightly differently in Alberta as we tend to be behind the curve. We didn’t experience the significant surge many of the other provinces did in sales and values during the first quarter, although it wasn’t all that bad here. We are still dealing with concerns about oil prices, the contining saga of low gas prices and the uncertainty in various areas of the energy industry.

As we meander through the rest of 2010, I can still see some real opportunity during the last half of the year for employment stability and easing of pressure on our energy industries. This should lead to more reactionary purchasing to take advantage of interest rates while they are still at low points. Eventually this could contribute to not only values increasing, but also an additional surge in the economy as stability continues to take hold.

If you have a few minutes to read throught he full report, it is available here, http://www.rbc.com/economics/market/pdf/house.pdf

If you have thoughts on what will happen over the next six months, next year or even tomorrow, I would love to hear them!

Wow, the banks sure have things stacked in their favor. Yet again, we are dealing with another bank who is effectively taking advantage of us in my opinion.

So if you are just sitting on the sidelines wondering what’s up, here is a quick recap from my perspective. When the boom was on and people were getting mortgages hand over fist for everything from homes to investment properties to recreational properties the banks had their hands out to lend a hand and their wallets open to rake in all their profits.

You had companies like GMAC (yes this was originally an auto financing company), Exceed mortgage, and numerous others lining up to provide mortgages and rake in profits from interest, set up fees and anything else they could profit from. Now with the downturn and profits not necessarily so abundant they are dropping off like flies.

GMAC was bought up by MCAP which is owned by Bank of Montreal. Now due to the “dangers” of mortgages they are getting out of mortgages, completely. If you have a mortgage coming due with them, you cannot renew, you simply have to get a new mortgage with someone else. Top that off with the tightening of acquiring new financing on rental properties and it turns into a real nightmare for anyone with one of their mortgages. I know this personally as we are having to sell one of our properties due to this. The positive spin is we have held the property since 2005, so we are ahead.

Exceed was another mortgage company many investors used for rental properties. Guess what they are doing? They aren’t exactly getting out of mortgages, but they are bumping up their interest rates and shortening terms. For one of my current mortgages coming due I can get a pleasant 8% interest rate for a term of one and a half years. I’m sure by the time we get to the end of that term it will be even more unpleasant.

The killer part, since it’s tougher to get new financing and since this property is now financed higher than 80% due to us purchasing it just as the market fell out, it will be next to impossible for me to get new financing without having to put up potentially $30,000 more to pay off the current mortgage and get it down to about 75% LTV. If I can even qualify for that.

So reluctantly I am stuck with a property I cannot sell (without a big loss), cannot refinance (without coming up big out of pocket) and I have to succumb to the banks exorbitant interest rates (which pisses me off). All in all a great start to a wonderful week!

There are some positive things happening, but why oh why do they have to offset themselves so much! Do they even have an inkling as to how much this impedes our eventual plans of selling everything and retiring to an island?

Do you have a bank story you want to share? Love to hear about it, so leave a comment or just email me back directly and tell me your tale.

Definitely happier times now! Not sure if anyone noticed, but I haven’t posted anything since April 14th, over three weeks ago. Don’t worry it’s nothing life or death that held me back, it’s just nightmare computer, hosting change and WordPress issues.

I was getting ready to put another post up for everyone late in the week of the 19th when I received an email form my old host warning me I had almost reached my monthly quota for traffic. I was close to 90%, which meant with this particular host I would incur extra expense if I went over. This was a good and a bad thing.

The good is my traffic, my readers, my showing up in Google search results has all been exploding for the last couple of months. The bad, since I had never hit the quota before, I had no idea what the costs to go over would be.

So I had a tough choice, no posts or transfer to a new hosting company. OK, maybe it wasn’t that hard a choice as I had been planning on it for a while, I just didn’t have the time currently to get it done. So my option was to refrain from any posts.

I finally had a chance to do the transfer May 1st, and had nothing but nightmares. I could get the main site up, http://www.housez.ca, but the blog wouldn’t show up,then when I found out the problem there, the database which controls all the information wouldn’t work. It has taken me the last week of research, talking to support people and tinkering to get back up.

So here is my first post from the new host, within the first half hour of being back up and alive! I’ve saved up some rants, some thoughts on the market and some views on some future trends for you, but you may not see them for another week as next week is completely hectic for me, but I may try and surprise you, so stay tuned!

For those of you wondering, I have moved my site to Bluehost which is where we currently have several other sites running as well. The great part is no more quotas, which means I can really work at ramping up traffic, I will have the ability to add a ton more features to make the blog and website run better and possibly more efficiently and I just have to find more time!

If you want to check out one of the other sites we have running on Bluehost right now, go visit http://www.31daystodeclutter.com. It’s a project that has been keeping my wife and our household quite busy! And yes, that is a picture of me above with my new longer hair look, it’s probably just a mid-life crisis thing, but I am having fun with it.

With interest rates poised to rise at any time, should I lock my variable rate mortgage in now? Or should I wait until summer when the rates start to climb to lock in my mortgage rate?

To answer this question correctly you have to understand that the variable rate mortgages and the fixed rate mortgages are based on two different rates. Variable rate mortgages are based on the short term rates which are tied directly to the Bank of Canada prime rate while fixed rate mortgages are linked to the bond markets.

The importance of these distinctions help to explain why they don’t necessarily both change at the same time. While nothing will change on your variable rate until the actual announcement of a rate increase, the bond market deals with future events occurring and usually occurs weeks if not months prior to an actual increase in the prime rate.

Translated, this means that while variable rates are likely to move upwards by a quarter point or quite possibly even more as early as April, but most likely in June or July, fixed rates could jump upwards by the same amount or likely more at any time on speculation of these potential rate increases. Of course, if the rates jump prior to the next Prime Rate announcement and Prime doesn’t change, it will slowly lower itself a bit to get back in line, at least until the next round of speculation as to the next upcoming rate announcement.

The important consideration for you is that fixed rates could jump as little as two weeks prior to Prime Rate changes or as much as two months prior. It all depends on what the people in the bond market decide.

So what does this mean for you currently? If it is crucial for you to be sure you get the lowest fixed rate mortgage possible, now may be the best time for you to lock your variable rate mortgage in. On the other hand, if you have a variable interest rate that is at prime or at prime minus a slight percentage and you only have a couple years left on your mortgage you might be better off riding the course.

Whiles rates are definitely going up, no one knows for sure how much the increase will be, and if your variable interest rate mortgage is currently sitting at a rate with a discount off prime, rates will have to increase substantially for your variable rate to be higher than the fixed rate currently. If you locked in now, you could cost yourself thousands of dollars of interest over the next year or two.

The other option if you are in the first few years of a 25 or 35 year variable rate mortgage, is to consider not only locking in, but actually extending it as well. This may involve some mortgage payout penalties and additional refinancing costs, but could ease your sleeping pattern if you have become concerned rates may sky rocket over the next several years. The trick with this is to determine whether the payout penalty would be offset enough by the savings of going with a fixed rate mortgage.

There is no right or wrong answer when it comes to locking in your variable rate mortgage as each situation, mortgage amortization period and stage in your individual mortgage differs from individual to individual. Plus the most important variable of all, the Prime Rate, is a moving target. It is going to come down to your comfort level, your ability to afford potentially higher rates in the future and what will keep your happy. For some this will be simply a matter of locking the rate in now and being content, for others it may involve just going with the flow for now. To help keep everything in perspective, we need to remember we currently have some of the lowest rates ever and there is only one direction for them to go, and it’s up, but even if they were to double, they will still be very attractive if we compare them to rates during the 80’s! So don’t get caught up in the fear, make sure you can afford the higher rates in the future, but if you can lock in at the lower rates currently and it doesn’t cost you it might be a wise decision.