TORONTO — October’s inflation rate fell to 3.1 per cent on a year-to-year basis — down from 3.8 per cent in September — mainly driven by lower gasoline prices, Statistics Canada reported on Tuesday.
Despite the slowdown, the agency said the largest contributors to inflation continued to be mortgage interest costs and rent.
Mortgage interest costs were up 30.5 per cent compared with a year ago as theBank of Canada’s benchmark interest rate sits at five per cent.
Here are some common questions about inflation and mortgage renewals.
While the rate of inflation and mortgage rates are correlated, James Laird, co-chief executive of rate comparison website Ratehub.ca, said the latest inflation report is unlikely to have any immediate effect on existing mortgage rates.
“We still need to watch next month and the month after that to see how inflation is trending back to that two-per-cent level,” he said.
However, with the Bank of Canada’s benchmark rate at five per cent — the highest since 2001 — homeowners with a mortgage renewal coming up will likely have to renew at a higher interest rate.
Laird said a homeowner’s choice on term length and whether they sign on for a variable or fixed rate depends on their risk tolerance and outlook for interest rates.
If a consumer feels that inflation is going to steadily make its way back to two per cent and push the Bank of Canada to begin cutting rates, a shorter-term loan, such as a one- to three-year term, or a variable-rate mortgage could work well.
He said consumers who opt for a fixed-rate mortgage with a shorter term will pay more in interest than those that choose a long-term fixed-rate loan. Homeowners have to be strategic in choosing the type of mortgage to make sure they’re able
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