So, you’ve locked in a mortgage rate, and then—bam!—rates take a nosedive. Now what? Does this mean you’re stuck paying a higher rate just because you got approved too soon? The short answer is no, and here’s why.
Rate Float Downs: Your Safety Net
First things first—let’s talk about rate float downs. This is a fancy term for what happens when your mortgage broker goes to bat for you to get a lower rate if market rates drop before your closing date. A good broker will monitor rate changes like a hawk right up until a few days before closing, making sure you get the best deal possible. That way, if rates go down, you benefit without having to lift a finger.
You’re Not Locked in Until You Sign
You’re only committed to the mortgage once you sign on the dotted line at the lawyer’s office. Up until then, nothing is set in stone. So, if rates drop, you can still take advantage of the lower rate without having to renegotiate your mortgage entirely. Your broker can handle the rate float down and get you the better deal, even at the last minute.
One Broker Is All You Need
Think you need to call up multiple brokers to keep your options open? Not if you’ve got a good one. A solid mortgage broker will always have your back, keeping an eye on the market and making adjustments to your rate if it goes lower. Having one reliable broker simplifies the whole process and ensures that you’re not bouncing around between people trying to figure out who has the best rate that week. Trust me, a good broker will already be doing all the legwork.
Why You Should Secure a Rate Hold Early
Securing a rate hold early gives you the best of both worlds. If rates go up, you’re protected. If they go down, you can still get the lower rate thanks to—you guessed it—rate float downs. Waiting closer to your closing or renewal date to lock in a rate might seem like a smart move, but it’s actually a gamble. It’s better to secure a rate early on and let your broker adjust it down if rates fall before you close.
Don’t Bank on the Bank of Canada Announcement
A common mistake is waiting for the Bank of Canada to make a rate announcement, thinking it will directly affect fixed mortgage rates. While the Bank of Canada’s decisions can influence variable rates, they don’t have a direct impact on fixed rates. Fixed rates are more tied to bond yields and market conditions, so it’s better to secure a rate hold when you can and let your broker worry about the rest. You can read more about how fixed rates react to bank of Canada announcements here.
The Bottom Line and Key Takeaways
Rate Float Downs Have Your Back: If rates drop before your closing date, your broker can adjust your rate down to take advantage of the lower rate, often up to just a few days before closing.
You’re Not Locked In Until You Sign: You’re only committed to your mortgage once you sign the final paperwork at the lawyer’s office, so there’s room to get a better rate before then.
One Good Broker Is All You Need: A reliable mortgage broker will continuously monitor the market for the best rates and products, ensuring you don’t need multiple brokers.
Secure a Rate Hold Early: Locking in a rate early protects you if rates rise and still lets you benefit from lower rates through rate float downs if they drop before closing.
The Bank of Canada Doesn’t Directly Affect Fixed Rates: Fixed mortgage rates are influenced by bond yields and market conditions, not the Bank of Canada’s announcements, so don’t wait around for rate decisions to secure your mortgage.
Getting approved for a rate isn’t a “one and done” situation. A good broker will always be on the lookout for better options for you, right up until a few days before your closing date. Securing a rate hold early gives you peace of mind, while a rate float down ensures you don’t miss out on lower rates if they happen. So, lock in that rate, let your broker keep an eye on the market, and relax knowing you’re covered no matter which way rates go!
