Mortgage Rates Increase in 2023

As you may have heard in recent news, mortgage rates are now at levels not seen since 2008.  The prime rate is now 6.70% , a huge jump from the 2.45% lows of early 2022. All fixed rates terms are up considerably higher from the low 2% range to over 5% on average. Borrowers are now having to deal with constrained qualifying ratios which are about 25% lower than a year ago. Incomes will be approved for much less of a mortgage amount than a year ago for example.  In early 2022 a $100k income would get about a $550k mortgage approved. That amount is now around $400k.

The current rate for a 5 year fixed mortgage is about 5.4% while the variable is 6.2%. Lenders are giving some extra discounts for larger mortgages where they will discount further but in general the rates are at these levels for most mortgages. If you have an upcoming mortgage renewal , talk to your bank or lender about extending the amortization back up to 30 years for example. This will help lower your payments as much as possible. Many borrowers are facing rate shock as the huge increase in mortgage renewal rates causes a big spike in payments unexpectedly. On average, mortgage payments have increased over 50% versus a year ago, whether for a mortgage renewal or a home purchase. Payments are up drastically across the range of different mortgage types.

 

If you are dealing with payment issues you can also look at refinancing your mortgage to payoff other debts such as credit cards, credit lines, car loans, etc. This could reduce your payments by hundreds of dollars, even over $1000 in many cases. Refinancing will typically cost a legal fee but in some cases that can be covered with promotional rebates, etc.  An appraisal of your home may be required although many lenders now do automated appraisal valuations. Expect a refinance to take about 2-3 weeks to close from start to finish.

If you are planning to purchase a home in 2023, make sure to get pre-approved with a mortgage broker and know your borrowing limits in this new higher rate market. It will be an easy process that only takes a few minutes to know what your maximum mortgage amount will be. All that is needed is your income or salary, current debts and any other property info.