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Major purchase

A look at mortgages and mortgage renewals

by Lana Sanichar

Most of us have, or will have, a mortgage. While I consider my mortgage to be the most important purchase of my life, much has changed since I purchased my home in 1995. I reached out to Russ Morrison, senior mortgage broker at the Morrison Mortgage Team (morrisonmortgages.com), for his take on mortgages for 2023 and into 2024.

Lana Sanichar What do you need to know when renewing a mortgage?
Russ Morrison A challenge that homeowners will face when their mortgage comes up for renewal in 2023 is payment shock. This is the sharp increase they will experience with their mortgage payment due to the rising lending rates. There are ways to combat this, such as increasing the mortgage amortization period, so payments suit a homeowner’s budget. Before signing on the dotted line, I recommend completing a needs assessment with a qualified mortgage broker to make sure a set plan is in place for the next term; also, never take the first offer from the lender.

LS Fixed rate or variable rate?
RM Most often the answer to this question will come to light once the needs and plans of a homeowner have been discussed and considered. Historically, a variable-rate mortgage (VRM) has outperformed fixed-rate mortgages. While a VRM has proven to be an overall money saver, it also comes with some risk. Since rates have likely peaked or will soon, a homeowner may want to consider either a short-term fixed-rate mortgage, since rates are expected to eventually fall, or a VRM where payments will change when the prime rate adjusts, so their payments will fall when the prime rate does the same.

LS Where are rates headed?
RM 2022 was full of many unexpected events. The Bank of Canada hiked interest rates by 4% to curb inflation and restore price stability. In 2023, many economists are predicting that the prime rate will remain steady for a better part of the year before it begins to fall in the latter part of 2023 and during 2024.

Whether you are purchasing for the first time or renewing, visit Canada.ca and type in “renewing your mortgage.” This will take you to a wealth of information, from an explanation of key terms to tools and more to help guide you through the process.

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Please do your own due diligence when making any financial decisions. This column is for general informational purposes only and may not apply to all provinces. It is meant to get the reader thinking about their finances; it is not meant to be used in lieu of advice from a professional.