Page 17 - Sports Energy News, Cornwall, Issue No 111

www.sportsenergynews.com Issue #111 April 2022 17

Continued from page 16 Continued from page 16
rates, but that spread is expected to investor’s outlook on the markets.
could easily exceed 4% by Easter. soon diminish - or disappear altogether company is better positioned today For almost all investors, this outlook
Current hikes have already led to a - with more Bank of Canada rate hikes than it was a year ago, why is the takes the pattern of an irregular cycle
general slowdown in mortgage activity. expected over the course of the year. stock price so much lower than it was of excessive optimism, followed by
Typically, in times of extreme volatility, The central bank’s next rate decision a year ago? As the famed investor
those with a pre-approval locked in is on April 13, and OIS markets are Benjamin Graham said, “In the short excessive pessimism, and back again,
try to act quickly, but those who don’t currently pricing in a 100% chance of a term, the stock market is a voting revolving around an ever-rising
have a pre-approval just pause. Rising 25-bps rate hike, although a 50-bps hike trendline as civilization innovates
rates are currently only impacting new isn’t being ruled out. For those facing machine, and in the long term, it is and moves forward.
homebuyers, as those with mortgage the difficult fixed vs. variable question, a weighing machine.” Clearly there One of the most important things
renewals coming up still have rate it appears there are no easy answers, as was a lot of voting going on in the we try to teach our clients is that
offers on the table that were received both options carry their own risks. year of 99 – and much less weighing. there is a critical difference between
prior to the latest hikes. But that will Five-year fixed-rate borrowers We’re a company that wants to be having an investment philosophy and
soon change. People who are renewing must accept the risk that they could weighed, and over time, we will be – having an outlook on the markets.
now are still getting six-week-old rates, over the long term, all companies are. We strongly believe, and history
so they are happy. In six weeks, it won’t be locking in a rate that has been In the meantime, we have our heads supports the fact, that all successful
be like that. temporarily elevated by spikes in both
bond yields and risk premiums, which down working to build a heavier and investors work from a resilient
The going rate for a 5-year fixed are likely to subside before the end of heavier company.” investment philosophy rather than a
mortgage five years ago was around their mortgage term. But the inherent market outlook.
2.75%, meaning any borrowers who risk in a variable-rate mortgage is that We can’t help but draw parallels If there is anything we can draw
have ridden out their full term will there is “technically no limit” to how from this statement to certain areas
soon face renewal rates of at least high variable rates can go, particularly of the financial markets over the from that letter it is that focusing on
one percentage point (or 100 basis since the Bank of Canada has made it past two years. It is important to what you own, what you’re aiming to
points) higher. For every 10-bps of clear it will do whatever it takes to bring understand that market movements achieve, and how you’re progressing
rate increase, the monthly payment for inflation back to target. in any given year are driven towards that long-term objective
5-year rates increases by about $5 per When bond yields appear to be primarily by investor sentiment and is all that really matters. The rest is
$100,000 of mortgage debt. emotions, otherwise labelled an commentary.
pricing in worse-case scenarios and
Variable rates about to rise further, the mainstream media are warning
too! borrowers to lock in at whatever rate Cornwall’s Oldest Paint,
Variable rates continue to be a they can get, now seems like a good Blind & Shutter Store.
popular choice for today’s borrowers time to remind readers that the fixed/ Family owned Business Since 1988
thanks to the roughly 1.50% spread variable decision comes with risk, no Presents “Famous Sports Quotes”
below equivalent uninsured fixed matter which choice is made.

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