After a period where mortgage rates appeared to be stabilizing at more affordable levels, the market has taken a new turn this May. Both fixed and variable-rate mortgages are experiencing changes that could impact your home buying or renewal plans.
What’s Happening with Fixed Rates
Fixed mortgage rates have started climbing after a period of gradual decline. Insured five-year fixed rates that had reached as low as 3.64% have now increased by 10 to 20 basis points. This trend extends to conventional (uninsured) fixed rates as well.
Industry experts note this represents a “steady worsening” in fixed-rate pricing that has been developing for some time. Even small rate increases can significantly affect your total payments over the life of your mortgage.
Variable Rate Changes
While the Bank of Canada’s prime rate remains at 4.95%, the discounts that lenders offer on variable-rate mortgages are shrinking. Major financial institutions including CIBC and Scotiabank have reduced their variable-rate discounts by 10 to 15 basis points in recent weeks, meaning new borrowers will pay more than they would have just last month.
According to mortgage professionals, this strategic shift allows banks to “cover their bets” against sudden market movements that could adversely affect their positions.
What This Means for Fraser Valley Homebuyers
If you’re planning to purchase a home in Abbotsford, Chilliwack, Mission, or elsewhere in the Fraser Valley, these changes present important considerations:
For Fixed-Rate Mortgage Seekers
If you value payment predictability and want to lock in now, fixed-rate mortgages still offer peace of mind. However, be aware that today’s rates are higher than they were just weeks ago. Experts suggest that if you can still secure a 5-year rate starting with a “3,” it’s worth considering — especially since rates were significantly higher just two years ago.
For Variable-Rate Mortgage Considerations
Despite the shrinking discounts, variable-rate mortgages may still prove more cost-effective over time, particularly if the Bank of Canada implements rate cuts later this year as many anticipate. This option remains attractive for borrowers who can manage some financial uncertainty and aren’t stretched by potential payment fluctuations.
Middle-Ground Approach
Some homebuyers are now considering shorter-term fixed mortgages, such as three-year terms. This strategy provides short-term stability while keeping options open to refinance sooner if rates begin to fall.
Making the Right Choice for Your Situation
The best mortgage choice depends on your personal financial situation, risk tolerance, and long-term plans. With lenders adjusting their strategies in real time, working with a knowledgeable mortgage broker who understands the Fraser Valley market can help you navigate your options and secure the most advantageous terms available.
As economic conditions evolve and the Bank of Canada adjusts its approach, your optimal mortgage strategy might look different than it did just a month ago. Stay informed and consider consulting with a local mortgage professional to make the best decision for your specific circumstances.
Need Help With Your Mortgage Options?
Our team at Browne Mortgage Broker + More specializes in helping Fraser Valley residents find the right mortgage solutions. With our deep knowledge of local markets in Abbotsford, Chilliwack, Mission, and Langley, we can help you navigate these changing conditions.
Contact our Abbotsford office at 604-850-5877 or our Chilliwack office at 604-795-2933 to discuss your options today.
