‍The lower your mortgage rate, the more you’re likely to save each month but when rates are low, that could mean higher costs for other things in your budget, such as a mortgage payment or a downpayment on a property.

What’s more, with less cash available to you for other things in your life and a longer-term mortgage, you may end up paying higher interest over the course of the mortgage.

Higher mortgage rates make buying a home more expensive than renting that’s why lenders typically offer lower rates on mortgages when they have to compete with other institutions offering similar products and services.

These competitive pressures cause lenders to raise their mortgage rates if necessary to remain profitable and maintain their margins accordingly. The result is that in many areas, it can be costlier to own than rent if you can find the right mortgage rate and terms that work for you and your family.

Why Are Mortgage Rates So Important?

A mortgage is perhaps the single largest financial obligation a person will take on in their lifetime with interest rates so low at the moment, it makes sense to see if you can get a lower rate butmortgage rates ontario 5 year fixed are also important because they influence the price of your home.

If you have a lower interest rate, you’ll have more money each month to put towards the down payment and closing costs which means you’ll likely make closing on your new home sooner and depending on the condition of your home how much work it needs, how old the pipes are, etc. you may be able to get a home equity mortgage to refinance. This lets you access the equity in your home and potentially withdraw more cash for other uses.

How Do Mortgage Rates Change Over Time?

Rates on mortgages are affected by two things: the current value of the dollar and the state of the economy. When the rate of the dollar is high, it’s more expensive for lenders to borrow money in US dollars which puts upward pressure on the cost of lending money to local lenders.

At the same time, the state of the economy is key and if it’s strong, then mortgage lenders have a smaller percentage of money to return to borrowers, which means they have to hike rates to make as much money as before, and if the economy is weak, then that puts less pressure on lending rates.

Mortgage Rate Calculators and Resources

Mortgage rates can be confusing, here are a few resources to help you understand why rates are what they are, and how they change over time.

Mortgage Rate Watch – The website of the Mortgage Market Council, a Canadian government-industry group that monitors the mortgage market, provides a comprehensive overview of mortgage rates.

Mortgage Saving Calculators – Mortgage calculators are a great way to get a sense of how much a specific mortgage payment will be.

Mortgage Rates – The Bank of Montreal has a mortgage rate calculator that lets you enter information such as your income and the purchase price of a new or resale property. You can also get a sense of what type of mortgage might work for you, depending on your situation.

Summary

Mortgage rates are historically low right now, but if they start to rise, you’ll be in a better position to understand what’s going on and make the best decisions for your financial future.