Inflation has always been a concern for mortgages, and inflation rates have been coming in quite high this year, meaning they are above what was expected. We are seeing the highest rates in over ten years, so homeowners will naturally wonder how this will affect their mortgage.

A neutral range is required to support the Canadian economy, but the monthly inflation rate has been above this range for several months, and inflation has been harder to control. Canadians will notice this high inflation whenever they shop for groceries, fill up gas or buy everyday necessities. As much as we’d like to think that these rates are just temporary, one can never be sure, so it’s important to be aware and to be prepared. This is especially true for homeowners because if these high inflation numbers remain in place, you can expect to see a potential rise in the real estate market along with a rate increase.

Real estate prices have been at an all-time high, and in some areas, these prices were starting to even out, although this surge can continue right until the end of the year. It is possible to see some form of stability in the coming year as that is what market experts are predicting. As of now, the inflation rate may affect mortgages, so this is something you have to consider.

Many are hopeful that the inflation of the real estate market will come to an end in 2022 because these rates cannot continue to increase forever, and it is a fact that continued inflation will harm our economy both on a large and personal scale, so everyone will be affected in some way. Those with fixed incomes will be particularly affected, so there is a lot of concern, but when it comes to mortgages, the Bank of Canada has stated that they are committed to maintaining the policy rate at its current record-low level until the inflation rate is maintained once again. While it’s hard to predict exactly when this will be, there is hope that such a shift will take place sometime in the next year, and we will likely experience dynamic shifts in mortgage rates in the next few years.

If you currently have a variable-rate mortgage, you likely won’t see any changes to the prime rate in the next year, so you probably won’t experience any changes in your monthly mortgage payments, whereas fixed-rate mortgages are more challenging and while they are at an all-time low at the moment, it’s possible to see a jump sooner than later. Overall, mortgage interest rates have been at a historical low this past year. As the economy continues to recover from the COVID-19 pandemic, you can expect to see the inflation rates stabilize, which may impact your mortgage interest rates, so it is something you need to look out for.

If you have any questions or concerns regarding your mortgage, Mortgage Makers can help, so give us a call today!