Mortgage rates are heading up fast.  If you're a homeowner with a mortgage, you might be wondering if it's time to refinance and lock in before more rate hikes kick in.

With rates heading up, now is the time to re-evaluate your mortgage, expert says.

Mortgage rates are rising, and fast.

Economists predict the Bank of Canada is set to hike the overnight rate by 0.5 per cent on April 13 to help offset inflation. This follows a 0.25 per cent increase in March.

As a result, mortgage rates are already heading up. Six months ago, the average five-year fixed mortgage rate was two per cent. Now it’s around 3.5 per cent to four per cent.

If you’re a homeowner with a mortgage, you might be wondering if it’s time to refinance and lock in before more rate hikes kick in.

Jason Heath, managing director of Objective Financial Partners, says fixed-rate mortgage homeowners facing renewal in the next six to 12 months should indeed consider paying a penalty now and renewing early.

“If the penalty is relatively small, then locking in at a mortgage rate today might save you interest down the road compared to where interest rates may be in the next year,” he says.

You should call your mortgage provider and make sure you understand how much the penalty is first though — if it’s large enough you may decide it’s best to stay put.

Rising interest rates are difficult to predict, Heath says. Five-year fixed rates are more strongly linked to the price of five-year government bonds than the overnight rate — but the general sentiment is “all about rising rates these days.”

Similarly, if you have a variable rate mortgage, it might be time to lock in a fixed rate.

Converting a variable rate mortgage into a fixed rate can be challenging, as you’re a “captive borrower,” Heath says. “You already have your mortgage with the bank, so you may not get the best rate or offer on a fixed rate, as opposed to if you were applying for a new mortgage” he adds.

Still, Heath says it’s probably a good idea, as rates could be higher in a year.

It wasn’t so long ago that the prime rate was considerably higher, he says. In 2007, it was 6.25 per cent.

“If you’ve bought a home in the last 15 years or less it might be difficult to imagine rates at that level again.”


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