According to Rob McLister, market expectations at the time of filming pointed to approximately another 75 basis points in rate increases from the Bank of Canada through early 2023. This would have taken prime rate up to roughly 6.20 percent, with the potential for smaller increments as rates near their peak.
McLister explains that term selection depends on individual factors including risk tolerance, prepayment probability, and five-year plans. For well-qualified borrowers who can handle volatility, short-term fixed or variable rates may be advantageous, while those seeking less risk might consider a hybrid or mid-term fixed option.
Lagging indicators such as materially higher unemployment, along with central banks like the Federal Reserve and Bank of Canada beginning to discuss a pause or wait-and-see approach, suggest the tightening cycle is slowing. When the bond market starts pricing in a greater chance of recession and a U-turn in rates, the worst of the hikes has likely passed.
McLister estimates less than a 50 percent probability in the near term for insured mortgages, noting that while the Department of Finance is researching the issue, they will likely take a wait-and-see approach unless unemployment spikes significantly and the economy weakens further.
Options include refinancing to extend amortization, using a home equity line of credit for interest-only payments to reduce monthly obligations, or exploring non-prime lenders that offer greater flexibility with extended amortizations up to 40 years and interest-only terms.
