It’s no secret that mortgages are the largest loans that most people will ever sign their name to. You’re borrowing hundreds of thousands of dollars (or more), yet you sign with a smile on your face. After all, mortgages are what gives people access to home ownership, which is definitely something to smile about!

With such high loan amounts, mortgage rates can be an exciting subject….especially when they have been spiraling downward for seven months straight! Mortgage rates haven’t just broken through their previous historical lows. They have smashed through them.

Prior to 2020, the lowest 5 year fixed rate ever offered was 2.14%. As of today, they can be found as low as 1.39%! Bank in July, I had predicted that 5 year fixed rates would continue trending down towards 1.50% by the end of the year. I did not expect them to fall below this level, as even 1.50% seemed like a ridiculously low number at the time…. But here we are now with as low as 1.39%.

 

The 5 Year Fixed 1.39% Rate Promo
The 1.39% 5 year fixed rate is not a mainstream rate, and is a promotion that is on for a limited time. It’s available only for purchases closing between January 2nd and February 28th, 2021. You’ll need to have a minimum down payment of 25%, OR less than 20%, meaning you’ll require mortgage default insurance such as CMCH. A simpler way of saying this is an insured mortgage. The maximum amortization is 25 years, and the purchase price must be below $1 million.

For purchases closing prior to December 31st, 2020, there are 5 year fixed rates as low as 1.49% for purchases and switches. If you have a mortgage coming up for renewal within the next 90 days, now would be a great time to reach out to take advantage of these great rates.

 

Switching To A Lower Rate Mid-Term
One drawback to falling rates is the penalty to break your mortgage early. The larger the difference between your current rate, and today’s mortgage rate, the higher the penalty (fixed rates only). Penalties are often substantially higher with major banks, however when there is this much difference between rates, penalties can be high with otherwise ‘fair penalty’ lenders as well. High IRD penalties generally apply to fixed rate mortgages only, as variable rate penalties are usually only three months interest. Even with higher penalties, there still may be opportunity to convert your current mortgage to a lower rate. Some penalties will be too high to offset with lower rates, while others can be justified. Everyone’s situation can be a bit different and the only way to know for sure is to reach out to us to find out what your options will be. It would be best to reach out to us after confirming your penalty with your current lender. We can then look into your options.

 

Mortgage Rates Can Vary
Rates can vary depending on your situation, and some mortgage lenders can have as many as seven different 5 year fixed rates….all tailored to a specific situation, and all being the lowest rate they’re able to offer. Regardless of what category you fall into, the vast majority of 5 year fixed mortgages are below 2% in today’s market.

Variable rate mortgages have fallen to as low as prime -1.15% (1.30%), which are available for high ratio (insured) purchases only that are closing after January 2nd, and within 120 days. Just as with fixed rates, mortgage rates can vary depending on your situation and can range from 1.30% to 1.85%.

 

Will Fixed Mortgage Rates Fall Further?
While anything can happen, it’s possible that mortgage rates may have bottomed out. With more COVID vaccines being announced, there is light at the end of the economic tunnel. I think everyone is pretty tired of hearing about the pandemic, and everyone wants to get through this as soon as we can. As the new vaccine begins administration with success, we can expect to see our economy improve, which will lead to rising mortgage rates. I would not expect to see any increases until well into 2021 however.

As for further decreases?

I wouldn’t expect to see rates fall any further, but as always, time will tell.

 

Please leave any questions or comments below!