When it comes to the Weather, September is probably my favourite month.
It’s as if you get the best of Summer and Fall.
This year is no exception. The weather in Windsor-Essex has been fantastic.
Our family took full advantage of it this past weekend.
Saturday was 82 degrees and not a cloud in the sky, so we spent all afternoon in the pool. To cap it off, we even went for a night swim.
Sunday was a bit more fall-like, so after Ben’s early morning hockey practice, we went for a nice family walk, and in the afternoon, we took the kids golfing (for the first time) at the Roseland Par 3.
Golfing with the kids was fun, frustrating, stressful and gratifying all at the same time.
We will go back, but maybe a few trips to the driving range, first lol.
I bring this up because it’s easy just to write off the summer once September comes around. We often get caught up in the grind of new routines (especially for those with kids).
But we’re very fortunate in Windsor-Essex, and September and October are fantastic months.
Prioritize spending as much time as possible outdoors, while the weather is still good.
You won’t regret it!
Something else I don’t want you to regret is your mortgage term selection…
This is poplur topic these days. It’s the most common question we get — “What mortgage term do I take?”
Up until a few months ago, for the past 18-24 months, more often than not we were advising borrowers to go with a 2 or 3 year term.
Why was 3-year fixed a good idea for the last couple of years?
Easy: we knew rates would eventually come down but weren’t sure when: so, we advised not to take a 5-year even if it was lower than a 3-year because 5 was just too long at high rates.
Guess What? Now we know when rates will come down. It’s now!
The Bank Of Canada has already started cutting, and will keep cutting…
Heck, we even had the US Federal Reserve announce a 50 Bps initial cut: effectively an Emergency Cut.
Additionally, recent reports show that CPI fell to 2%, and stories of job losses and a slowing Canadian economy grow every day.
This is all fuel for a lot more rate cuts.
But how low will Bank of Canada go?
Originally Economists thought the BoC stops at 3% sometime next Summer, but what if that number is 2.5%? Or 2.25% or 2%.
That’s not impossible.
If that happens, we will see Variable Rate Mortgages in the low to mid 3% range.
How soon? Perhaps very soon, as the discussion on 50 Bps cuts grow.
Where does that put 5-year fixed rates?
First, we need to understand that just like fixed rates soared before Bank of Canada even STARTED to raise rates, fixed mortgage rates will STOP falling before the BoC does its last cut.
Why? Fixed Rates are developed from Bond Yields which are traded.
The entire concept behind successful Government Bond Trading is to operate on trends and outcomes BEFORE they happen particularly if they are obvious.
On that basis, we can confidently say that the Bond Market will bottom out before BoC stops cutting rates.
Here’s how that applies to picking Mortgage Rates today…
– If we accept that fixed rates bottom in 2025, then STOP taking 2-year and/or 3-year fixed options.
– Consider variable since we know it will keep dropping & lock into fixed next year.
– Consider 5-year fixed if you can’t handle variable.
But understand that fixed rates will keep dropping into next year.
The most anxious people right now are those with 6.29% to 5.49% mortgages from over a year ago who are tempted to pay penalties and break now.
Have a bit more patience, next year you will likely secure an even lower rate.
The Prime Rate may go lower than we thought, and fixed rates will bottom first.
Act accordingly!
For anybody out there currently struggling with their own mortgage term decision… feel free to reach out for some advice.
Whether the mortgage is through us or not, we are happy to help.
Until next time,
Vince
