October 3, 2022

Wire Service Canada

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‘Great concern’ mortgage interest rates the perfect storm

The crisis in Ukraine has caused panic to everyone with delinquent mortgage loans, and the fear among the people has become palpable.

In fact, the numbers speak for themselves: the surge in mortgage loans is already underway but could explode soon. The strong inflation recorded during this period It’s not just that the electricity, gas and fuel sector bills are skyrocketing.

But let’s see what happens to the mortgage payment. So far, mortgages have been intriguingly shielded from spiraling inflation. Of course, the fear of price hikes was there but it never turned into something tangible. But today, the mortgage is growing at a fixed rate of 0.4%, and according to experts, things are only going to get worse. in a clear way. Let’s try to understand what can happen on a case-by-case basis.

What is happening now on a case by case basis

Those who take out a fixed-rate mortgage today are already paying 0.4% more than they would have done a few weeks ago. This is inevitable in this scenario, but in reality things can really go downhill. In fact, the mortgage rate is related to the rates decided by the European Central Bank. So far, the European Central Bank has kept interest rates very low, and this has kept rising mortgage rates in check. But he won’t be able to do that forever. Inflation is rising alarmingly and at some point the European Central Bank will likely have to raise interest rates.

If the European Central Bank raises interest rates, there is a problem

Those who risk the most are those who already have an active variable mortgage. This type of mortgage is affected by the rates charged by the central bank (albeit indirectly) and therefore could rise significantly if the ECB raises interest rates. This is why industry experts advise those who have a variable rate mortgage to proceed immediately with the solutions. Let’s see what that means. With Subrogation, your mortgage is transferred to another institution that offers a fixed rate. This can certainly protect against the expected massive price increases.

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But in addition to solutions, you can also renegotiate the loan with your own organization. Of course, as we’ve seen today, the mortgage has gone up a little flat rate already, So the solutions will not be very convenient. But at least we will know that the price we set today will remain unchanged.