Should I fix my variable rate mortgage right now?
October 8, 2008 10:04 am Credit, Interest Rates“Should I fix my variable rate mortgage right now?” is a question that me and my collegues have been hearing quite a bit recently.
It is a good question. The finacial markets are in up heaval. Every time you turn on the radio or TV there is talk of recession. And people want to take some action to protect themselves.
This morning the Bank of Canada along with five other central banks reduced thier prime lending rates. Time will tell if this translates into banks reducing thier prime lending rates but it looks favourable.
If they do and you have a variable rate that is 0.6% below prime then your rate will go from 4.15% to 3.65%. Now lets compare that to a typical fixed rate right now of 5.8%. For every $100,000 you have borrowed right now by staying with the variable you will save $121 every month.
Economists are also suggesting that rates will continue to drop for the foreseeable future.
“The risk is that 50 basis points wasn’t enough, and that none of that will pass through to consumers and businesses as interbank funding pressures continue to worsen even after the rate cut,” said Derek Holt, vice-president of economics at Scotia Capital Inc. “This is not the last of the cuts, and both the Fed and the Bank of Canada could easily cut another 100 basis points.”
There may come a time where it will be prudent to fix your rate and you are welcome to do this at anytime but I would rather have that $121 in my pocket every month.
Call if you have any questions.