Blast from the past rates

Brandon Scott is a Sherwood Park based mortgage consultant and the author of a weekly column entitled Real Estate Solutions in the Sherwood Park News. This article was originally published on August 24, 2012 Who remembers the year 1982? The television sitcom Family Ties premiered, Michael Jackson released Thriller, and Wayne Gretzky with the Edmonton Oilers would set a record for most goals in a season: 92. Mortgage rates? Back in 1982 they were 19 per cent. To illustrate the significance of what that rate would look like imagine a $200,000 mortgage amortized over 25 years. The monthly payment alone would be over $3,000 a month and one would need to earn an income of $125,000 a year just to qualify. Thank goodness some things have changed in the last 30 years. Computers have advanced significantly since the Commodore 64, hairstyles from the ’80s have lost their height, and mortgage rates have been reduced. The average five-year rate over the past 30 years has been 9.02 per cent. Even better is that rates have been hovering around historical lows for much longer than anyone thought they would, creating a golden opportunity for Canadians. Today the dilemma facing most buyers seems to be whether or not to take advantage of an even longer term than the “play it safe” five-year term that most people request. With seven and 10-year terms currently below four per cent from a variety of lenders, considering these options may make more sense. Compare that to taking a five year term and renewing your mortgage in the year 2017 at what is likely to be a much higher rate environment. The savings could be huge in the long run. Of course everyone’s mortgage plan is unique, because everyone’s goals are unique. It may be worth a second look before just assuming the lowest five year rate is your best bet. Source: Bank of Canada: Five year mortgage rates. Download the current e-edition of the Sherwood Park News