Adapting to the Changing Mortgage Market: Strategies for Mortgage Brokers in a Rising Interest Rate Climate
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Brianna Frith

Author, Founder at Endhome

As of January 25th, the BOC (The Bank of Canada) increased interest rates for the 8th consecutive rate hike, bringing the policy rate to 4.5 per cent. Though this rate increase is not a surprise, the BOC does expect to hold off on further rate hikes. This will make the BOC the first major central bank to signal an end to monetary policy tightening.

Bank of Canada Governor Tiff Macklem stated in recent news releases that this is only a conditional pause. They are taking time to assess if the raised rates are doing as they intended; get inflation to the 2-per-cent target. 

Rising interest rates have effects across the board, and mortgage brokers are not exempt. As a mortgage broker, it is essential to stay on top of the latest market trends.

This conditional pause puts the industry in a “hold your breath” approach, waiting to see if more hikes are incoming or if we are in the clear. You may be watching the situation with careful eyes and open ears. However, as a mortgage broker, several strategies can be used to help your clients navigate this rising interest rate climate. Eyes and ears can keep watch on the interest rates, but your actions will always speak for your clients. 

One standard strategy is to educate their clients on the impact of interest rates on their mortgage payments. Now more than ever, this is a key factor in aiding your clients. As interest rates increase, it can make obtaining a mortgage more challenging for potential homebuyers. It can also impact existing homeowners who are looking to refinance their mortgages. The BOC is anticipating spending to slow further as homeowners renew their mortgages at higher interest rates. By educating your clients on this, you can help them make more informed decisions about their mortgage options.

Another strategy is to explore alternative mortgage products with your clients. For example, adjustable-rate mortgages (ARMs) may be something to consider as the rate hikes take a pause, or as they risk more change over time. On the other hand, fixed rates have been decreasing since mid-last year. Clients with variable rates can convert into a fixed rate if they so wish. Most variable rate mortgage products allow conversion to a fixed rate of equal or greater length of the remaining term.

All to say: by considering alternative options, you can help your clients find a mortgage that best fits their needs and budget.

Additionally, as a mortgage broker, you may have access to a wide range of mortgage products from various lenders. By staying current on the latest mortgage rates and terms from various lenders, you can help your clients find the most favourable mortgage options.

Finally, you can also help your clients to explore government-backed mortgage options like the First-Time Home Buyer Incentive (FTHBI) or the Home Buyer Plan (HBP). These programs can help make home ownership more affordable for first-time homebuyers and can also help reduce the impact of rising interest rates overall.

Mortgage brokers play a crucial role in helping clients navigate the challenges of a rising interest rate climate. By educating your clients, exploring alternative mortgage products, and shopping around for the best rates and terms, you can help them find a mortgage that fits their needs and budget. 

You can take a step forward in uncertain times with more certainty for your clients’ overall mortgage closing experience.

Endhome is here to help you take that first leap with confidence. Book a free consultation today to see how our real estate lawyers can support you!