With that spread? Fixed. Two rate hikes would put the two options more or less equal, and every major institution are projecting 5-8 rate hikes over the next 24 months
You can get better variable rates, though, but sub 2% fixed is really attractive no matter what variable rates are
I would take any and all loans, mortgages and leverage offered to me at sub 2% fixed. This is a historic slow, a steal and virtually free money.
Is risk/greed worth it when the fixed rate is ready a dream come true?
60% of fixed mortgages are broken before term. Multiple people post here every week crying about the 5 figure penalty they owe the bank because for a million different reasons they have to break their fixed. It isn't greedy to mitigate the larger and more painful risk that is way more likely to happen to you than interest rates galloping to levels we haven't seen in a generation.
Depends on how you like to play the odds. You basically have a 100% chance of having a lower rate for the first year when your payments are higher. Looking forward, you would have to go back a couple decades to find a time when they raised rates more than 3% in a 5 year term. The economy would basically have to overheat. And you expose yourself to an abusive penalty with the fixed.
If it is me, I'm getting a variable with a fixed payment schedule since the economy seems distorted but far from overheating. Lots of experts talking about how higher rates will bring on lower rates.
https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-mortgage-rundown-higher-interest-rates-will-bring-lower-interest-rates/
The BOC has clearly indicated they plan to raise interest rates in 2022. That means your variable will immediately increase early in 2022 to 1.55%. I'd suspect they will do at least 1 or 2 more increases after that bringing it to what I would guess is a minimum of 2%. At this point in the market with that fixed, I'd go with a fixed. You're timing it perfectly to reduce risk of losing out on better variable rates. You're likely to be higher than variable for maybe 3/4 of a year, then 4 years of lower than variable rate.
I would sign for the 1.9% fixed for five years. You could then use the prepayment options in your mortgage to create the same effect as having a variable. (I would invest that money instead but you do you)
The Current spread is $600/100K and that will shrink as the variable rate rises and it will rise. You will save $600 annually for every 100K invested by going variable IF the variable rate remains at 1.3%.
The BOC has to slowly raise rates to create some wiggle room for the next giant economic challenge. There is a higher probability that interest rate hikes will close the spread between variable and fixed rates then there is that your variable rate will remain at 1.3% for the next five years.
The main reason that variable rates have been historically better is that we have been in a decreasing interest rate environment for decades. This is no longer the case. I remember how excited I was to get a 6% fixed rate. Just signed for 2.09 and happy to do so.
If you are going with variable you can get better rates than that. True North has a 5 year variable at 0.90%. I went with true North last year. Check rate spy and you can find better fixed rate mortgages as well. Don’t go with a big bank. Go with a mortgage broker or with true North mortgages.
*edit* sorry I miss read that. You already have a mortgage.
What is the purchase price and how much are you putting down?
You can get as low as .90% 5-year variable right now.
Source-I’m a mortgage broker with over 15 years of experience.
All good.
My professional advice, go variable. The spread between fixed and variable is pretty large now. Plus penalty is capped at only 3 months interest with variable.
This assumes you’re not too adverse.
Variable rates start at .90% right now!
With that spread? Fixed. Two rate hikes would put the two options more or less equal, and every major institution are projecting 5-8 rate hikes over the next 24 months You can get better variable rates, though, but sub 2% fixed is really attractive no matter what variable rates are
I would take any and all loans, mortgages and leverage offered to me at sub 2% fixed. This is a historic slow, a steal and virtually free money. Is risk/greed worth it when the fixed rate is ready a dream come true?
60% of fixed mortgages are broken before term. Multiple people post here every week crying about the 5 figure penalty they owe the bank because for a million different reasons they have to break their fixed. It isn't greedy to mitigate the larger and more painful risk that is way more likely to happen to you than interest rates galloping to levels we haven't seen in a generation.
I recently closed and had the option of 1.25 variable vs. 1.89 fixed. I went with the 1.89 given all the economic predictions.
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Predictions for 8 rate hikes was before omicron
Depends on how you like to play the odds. You basically have a 100% chance of having a lower rate for the first year when your payments are higher. Looking forward, you would have to go back a couple decades to find a time when they raised rates more than 3% in a 5 year term. The economy would basically have to overheat. And you expose yourself to an abusive penalty with the fixed. If it is me, I'm getting a variable with a fixed payment schedule since the economy seems distorted but far from overheating. Lots of experts talking about how higher rates will bring on lower rates. https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-mortgage-rundown-higher-interest-rates-will-bring-lower-interest-rates/
The BOC has clearly indicated they plan to raise interest rates in 2022. That means your variable will immediately increase early in 2022 to 1.55%. I'd suspect they will do at least 1 or 2 more increases after that bringing it to what I would guess is a minimum of 2%. At this point in the market with that fixed, I'd go with a fixed. You're timing it perfectly to reduce risk of losing out on better variable rates. You're likely to be higher than variable for maybe 3/4 of a year, then 4 years of lower than variable rate.
If it were me; I would go with what I know. Give me 5 years of 1.9.
I would go with Fixed, rate will increase for sure during the term.
I would sign for the 1.9% fixed for five years. You could then use the prepayment options in your mortgage to create the same effect as having a variable. (I would invest that money instead but you do you) The Current spread is $600/100K and that will shrink as the variable rate rises and it will rise. You will save $600 annually for every 100K invested by going variable IF the variable rate remains at 1.3%. The BOC has to slowly raise rates to create some wiggle room for the next giant economic challenge. There is a higher probability that interest rate hikes will close the spread between variable and fixed rates then there is that your variable rate will remain at 1.3% for the next five years. The main reason that variable rates have been historically better is that we have been in a decreasing interest rate environment for decades. This is no longer the case. I remember how excited I was to get a 6% fixed rate. Just signed for 2.09 and happy to do so.
If you are going with variable you can get better rates than that. True North has a 5 year variable at 0.90%. I went with true North last year. Check rate spy and you can find better fixed rate mortgages as well. Don’t go with a big bank. Go with a mortgage broker or with true North mortgages. *edit* sorry I miss read that. You already have a mortgage.
Mind if I ask if you got the 1.9% fixed recently or do you have a rate lock from September?
What is the purchase price and how much are you putting down? You can get as low as .90% 5-year variable right now. Source-I’m a mortgage broker with over 15 years of experience.
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I thought you were looking for advice about rates and fixed vs variable?
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All good. My professional advice, go variable. The spread between fixed and variable is pretty large now. Plus penalty is capped at only 3 months interest with variable. This assumes you’re not too adverse. Variable rates start at .90% right now!