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Today: 17.01.2018 - 14:40:18
   Canada Mortgage Hub Discussion Board -> Mortgage Rates Canada -> Why do mortgage rates go up when the term goes up?
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ortopedica

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Why do mortgage rates go up when the term goes up?
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p6d5

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As the years go by, the value of the dollar drops. The dollar cannot buy so much as time passes. It is called the time value of money. That is why stocks go up. The dollar loses its value and the price of stocks go up and people buy for a "good deal." So if you buy a house for $100K, the buyer wants $100k plus interest to make up for the devaluation of the money.
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ou6

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The general "rule" in banking and in finance is that the longer the loan, the higher the interest rate.The reason is that the lender takes on more risk with longer term loans. For example, if the lender commits to a fixed rate 10 year loan to you, but rates rise sharply within 3 years, they lose out on getting that higher interest rate. (conversely, if rates fall, then the bank wins on that fixed 10-year loan to you).(BTW this sounds like a type of mortgage offered in Canada. Also, interest rates are relatively low now, even if rates are up slightly from a month ago. And, the general fear is that interest rates in Canada will go higher in the years ahead. So locking in something fixed now is a good deal for us the consumers, in my opinion).
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