911 Rod

Normally important questions like this go to my hockey buddies. lol

I'm looking at a 5 year closed variable mortgage and have been offered 2.6%

Any thoughts?

Thanks
Rod

hoffa

I've seen rates for 2.89 fixed for 5 years. For the extra .29% it seems like the better thing to go fixed.

I am no economist, but I'd be hesitant to take a variable rate at this point. I think there is talk of raising interest rates next summer.... how fast is the question.

Turbodan

+1 what hoffa said

Pags993

^^^ Another +1 fixed rates are just too low to ignore any longer. The piece of mind alone is worth the slight differential. Just as important to me is the prepayment allowance which could save you big interest $'s in the long run.

The Stig

I've been in the mortgage racket for the last 10 years. No matter which way you slice it, fixed or variable, you pay the same. Some years fixed are better, some years float is better.

It boils down to comfort. Are you happier with a static principal and interest payment, or can you stomach the ups and downs.

Right now, 5y bond yields (which is the basis for 5 year fixed mortgages) are moving up. So fixed rates will start increasing.

I chose to float. But that's me. YMMV. Always shop rates, and get a good broker to do the running around for you. I can suggest one if needed.

Good luck.

911 Rod

.0029% does not sound like a lot, but it works out to $290/year per $100,000.

Onami

I just did 2.89% for 5 years fixed. My variable was 2.3% at the end of my term.

Turbodan

How can u say this?
I think The past 10 years variable has always been lower.

aviography

That's what I just did as well, same numbers.

A friend with RBC was offered 2.85% 5 years fixed, I was unable to get TD to match.

Only1Buck

Is it a primary or secondary home?

Is it conforming or non-conforming (i.e. jumbo)?

Do you intend to have the home beyond 5 years?

Do you prefer consistency?

Answers to the above questions will help guide you.

The Stig

How can I say this? I don't know many people that pay off their house in 10 years. So a 10 year time horizon is too short to compare fixed/variable. Certainly not when the 35 year amort product was available. Look at a 25 - 35 year interval.

Also over the last 10 years, the yield curve has been relatively flat and sometime inverted depending on short rates. Short rate in 2007 and 2008 went completely sideways when commercial paper and securitization went down the toilet.

So depending on how sharp your pencil was, and if you timed it right you could have landed a fixed rate lower then prevailing floating rate. Because no one wanted to lend at floating rate - it was too volatile and hellish to price correctly.

With the shape of the curve, banks have been playing silly buggers with pricing depending on their asset/liability mix. Some days they want to draw customers into 5y assets because they are long 5y liabilities, so they'll be like Walmart and roll back the prices. Again, sometimes cheaper than float.

Mortgage products are a loss leader for most banks. It's the product that gets you in the door so they can get your LOC, credit cards, insurance , RSPs etc. Origination, underwriting and broker fees are so high in the first term of a mortgage, that the real juice in a mortgage is in the second and subsequent renewals - because origination and broker fee are lower (or non existent).

Bottom line - don't accept the first offer a lender gives you. Read the fine print. I'm willing to roll the dice on variable but most people don't and thats ok. It keeps the banks earning their $1B quarterly profits.

myw

^^ amazing insight.

that imo is an amazing fixed mortgage rate. has to be practically the lowest fixed rate of all time in canada

thequest

I locked in for 5-years fixed at 2.69% with National 3 weeks ago. I was offered 2.5% for 5-years variable at the same time so it was a no brainer.

69gaugeman

Not even close. I had 2.45 from TD ~5 years ago

wc11

that imo is an amazing fixed mortgage rate. has to be practically the lowest fixed rate of all time in canada[/QUOTE]

Year & a half ago, I got....ready.......2.15% for 5 years at RBC.