Decoding Mortgage Rates: What They Truly Mean for You With Lynn Kelly

For mortgage advice: Lynn@LynnKelly.ca, 778-839-9363

Discuss recent Bank of Canada interest rate changes and their impact on mortgages, with insights from mortgage broker Lynn Kelly.

Key Takeaways

• Bank of Canada rate cuts only directly affect variable rate mortgages, not fixed-rate mortgages
  Fixed mortgage rates are based on bond yields, not the Bank of Canada rate
  Pre-approval and understanding true affordability is critical before house hunting
  Appraisals play a crucial role in determining how much a lender will finance

Topics

Bank of Canada Rate Cut Impact

• Bank of Canada rate dropped from 4.25% to 3.75%
  Banks' prime rate decreased from 6.45% to 5.95% as a result
  Only affects variable rate mortgages, not fixed-rate mortgages
  For every $100,000 of mortgage on a 25-year amortization, borrowers save about $30/month

Fixed vs Variable Rate Mortgages

• Fixed rates currently around 4.2-4.4% for 3-year terms
• Variable rates now around 5.45% (prime 5.95% minus ~0.5% discount)
• Historically, variable rates tend to outperform fixed rates over time
• Fixed rates offer payment stability, while variables can fluctuate
• Variable rates easier to break (3-month interest penalty) vs fixed (interest rate differential)

Mortgage Pre-approval and House Hunting

• Critical to get pre-approved before house hunting
• Pre-approval should involve detailed discussion (1+ hour) about finances, not just a quick check
• Buyers should not exceed pre-approved amount, even in competitive situations
• Appraisals determine maximum financing, regardless of purchase price
• Buyers may need to cover shortfall if appraisal comes in lower than purchase price

Appraisal Process

• Lenders finance the lesser of purchase price or appraised value
• Appraisers use recent comparable sales to determine market value
• Adjustments made for property differences (e.g., single vs double garage)
• Banks have lists of approved appraisers; brokers choose from that list

Next Steps

• Potential homebuyers should seek thorough pre-approval before house hunting
• Work with reputable agents and mortgage professionals who prioritize education and client protection

Be cautious of overbidding in competitive situations, considering appraisal risks
Consider speaking with Lynn Kelly for mortgage advice: lynn@lynnkelly.ca, 778-839-9363

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