The war in Iran is fundamentally shifting the outlook for mortgage rates, and it's time to reevaluate your mortgage strategy. The probability of lower mortgage rates this year has shifted from 'maybe' to 'probably not'. The war in Iran has caused a 67% oil spike, which can significantly impact mortgage rates. Oil crises can rapidly increase inflation, and mortgage rates are closely tied to inflation. A sustained oil supply shock can push mortgage rates up by a percentage point or more. The current situation raises questions about the duration of the war and the potential for ongoing threats from Iranian proxies, which could keep oil prices elevated for months. This, in turn, could impact inflation, government bond yields, and mortgage rates. Global central banks are already considering rate hikes, and the Bank of Canada's policy rate is closely correlated with interest rates. The preference for variable mortgages is historically high, but this might prove costly. Longer fixed rates offer stability and predictability, especially for those with concerns about job security or a tight family budget. With lenders offering fixed rates in the high three to low four percent range, it's a fair deal compared to the average five-year fixed rate of four percent. Considering the Bank of Canada's persistent failure to hit its two percent inflation target, four percent rates look even more attractive. As an expert, I recommend securing pre-approval, weighing fixed and variable rates, and considering longer fixed terms for those with significant debt or variable income. The war in Iran is a significant event that will likely have long-lasting effects on the economy, and it's crucial to adapt your mortgage strategy accordingly.
