Fixed versus variable – locking in?

Home/News/Fixed versus variable – locking in?

Fixed versus variable – locking in?

With fixed rate mortgages being offered at record low interest rates, there has never been a better time to look at locking in your variable rate mortgage. So what should you do: fixed versus variable?

Is it worthwhile for all of us to lock in our old variable rate mortgages? That depends on where you believe rates will go over the next few years. Most economists believe the prime lending rate will not be changing for another year or more. While fixed rate mortgages seem to be relatively flat right now, it is highly un-probable that they will remain as low as they currently are.

If we look at a direct comparison of a $300,000 fixed rate mortgage locked in at 3.09% for 5 years or a variable rate mortgage at prime – 0.35% (2.65% at today’s rates) increasing by 0.50% each year, you would save $10,000 by being locked into a fixed rate mortgage.

Assuming that you are already have a variable interest rate mortgage with the old variable discounts of prime minus 0.85% (2.15% at today’s rates) but are already 1 year into the 5 year term, what would that look like? We’d compare it against our 4 year fixed rate special of 2.95%. In this scenario the variable interest rate represents a $1,100 savings over the fixed rate mortgage.

Ultimately, the lesson to be learned is that each situation is unique.

At YMS we are your trusted mortgage advisors. We are always happy to answer your questions and look at your financing needs with a personal perspective.

Important Reminder Regarding Your Mortgage Renewal

If your mortgage is up for renewal and you are being contacted by your lender to early renew before the maturity date please call or email us before signing the renewal. We are able to give you a quick recap of rates in the market to make sure you aren’t signing for a rate/term that isn’t beneficial for you. Often times your lender will tell you that you only have a very limited time to sign the renewal to pressure you into taking the rate they want. Get in touch with us for a quick 2nd opinion!

If you require any further information regarding this article or any other mortgage matters please contact our office at 604‐556‐3893. Also, as a reminder to anyone looking for a mortgage, we offer 4 month pre-approvals at no cost to you. This means that you can get a rate hold for up to 4 months to protect yourself in case rates rise.

Comments Off on Fixed versus variable – locking in?

About the Author:

Alex Kotai
Alex Kotai has worked in the mortgage lending business for over 10 years. His career started at HSBC Bank Canada where he spent most of his time in senior management roles which involved training and managing the sales staff at his branch. After leaving HSBC, Alex decided to open his own mortgage brokerage firm, Your Mortgage Source. Through his company, Alex has access to many lenders across the country with a very expansive list of products.