Fixed Vs Variable Rates in Mortgages
We sat down with mortgage guru Renee Huse and discussed a variety of mortgage topics, this REP TALK discusses variable vs fixed mortgages and Renee provides a fresh and unique perspective on why a variable might benefit you more! You can also read our latest blog where we chat with Renee about one of our listings and the investment opportunity it renders.
Renee often gets the questions (from our clients) variable or fixed, "what should we do" she said that the answer changes often, and gave us insight as to what she would do in today's market. Presently we're seeing the largest differential between variable and fixed rates in a long time (possibly ever) a five year fixed mortgage is in and around the 3.5% fixed mark right now, while variable is around 2.5%.
The bank of Canada determines variable rates through their overnight lending rates. So when you think about the fixed rates, the BOC would have to raise their rates four times to get to where the fixed rates are presently at. You'd be able to jump into a variable and invest the difference, or pay that onto your mortgage allowing you to take years off your mortgage.
Renee is often asked about rates going up, she stated that there is some upward pressure in interest rates, but in the last 7 years (as of Oct last year) there weren't any increases and we've only seen three since, with none in almost a year. Variable mortgages also offer more options, lets say you're forced to move (job change) the penalty is only three months interest - $2,000 - $2,500 on a $300,000 mortgage vs $10,000+ on a fixed mortgage.
Variable rate mortgages can go up, but they also can go down, Renee doesn't see a lot of incentive for the Bank of Canada to continue to increase the rates.
Our mortgage specialist can sit down and go through a custom scenario that is tailored specifically to your situation and needs, ensuring you're making the best choice in this big mortgage decision.