05-07-2009, 02:51 PM
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#1
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Often Thinks About Pickles
Join Date: Jan 2007
Location: Okotoks
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What's your forecast for mortgage rates for the next 12 to 18 months? Advice wanted.
I'll be getting a new mortgage within the next month and I'm thinking of signing a 2.9% fixed 1 yr closed mortgage.
Personally, I don't think we will see a rate increase in the next 12 months. At the end of my term, I'll look at the trend and decide if I want to lock into a fixed 4 or 5 year mortgage (best current rates for a 4 or 5 year mortgage are in the 3.59 to 3.79% range....) or continue on with another 1 year closed mortgage.
What do you think is going to happen to interest rates in 12 to 18 months from now?
Last edited by Rerun; 05-07-2009 at 04:24 PM.
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05-07-2009, 03:48 PM
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#2
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Franchise Player
Join Date: Aug 2005
Location: Memento Mori
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Well, they could go up, go down, or stay the same.
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The Following 3 Users Say Thank You to Shazam For This Useful Post:
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05-07-2009, 03:53 PM
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#3
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Playboy Mansion Poolboy
Join Date: Apr 2004
Location: Close enough to make a beer run during a TV timeout
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Quote:
Originally Posted by Rerun
Personally, I don't think we will see a rate increase in the next 12 months.
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But what will the 12-18 month forcast be at that point? If they are anticipating rates going up (ie say the recession is over) then a 5 year term will be more.
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05-07-2009, 04:05 PM
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#4
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Scoring Winger
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It is pretty much impossible for rates to go any lower than they are now, so they can only go up. It's the "when" that is impossible to say. The prime rate will probably remain unchanged for the next 12 months, but as soon as there is any whiff of inflation, that 5 year, 3.8% rate that you can get right now will be gone and will never be seen again in our lifetime.
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05-07-2009, 04:05 PM
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#5
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Often Thinks About Pickles
Join Date: Jan 2007
Location: Okotoks
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Quote:
Originally Posted by Shazam
Well, they could go up, go down, or stay the same.
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I don't think down is an option. Bank of Canada prime won't drop lower than 0.25%
Rates will go up when the Bank of Canada raises the prime rate. With the current recession, I don't see that happening in the next 12 months. I figure rates will remain static until next summer and then you may see a 0.25 to 0.5% increase.... but not more than that (the Bank of Canada won't want to kill any economic turn around that the country will hopefully be enjoying by next summer).
So my plan is, as I said before, to lock in the all time low rate of 2.9% rate for 1 year and then at the end of the year renegotiate my mortgage into a 5 yr term and lock it in at the best 5 year rate I can get (hopefully it will be the same as it is now).
Anybody think the Bank of Canada will be raising its prime rate withing the next 12 months? I don't think they will....
If you were getting a new mortgage right now, what would you do and why?
All your help and your opinions will be greatly appreciated. My mortgage will be approx. $250,000 and a few percentage points makes a big difference in interest paid over the lifetime of a mortgage.
Last edited by Rerun; 05-07-2009 at 04:11 PM.
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05-07-2009, 04:06 PM
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#6
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First Line Centre
Join Date: Oct 2002
Location: Calgary
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I'm not an expert, but getting anything less than a 5yr fixed would be monumentally stupid, IMO.
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05-07-2009, 04:16 PM
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#7
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Scoring Winger
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Quote:
Originally Posted by Rerun
I don't think down is an option. Bank of Canada prime won't drop lower than 0.25%
Rates will go up when the Bank of Canada raises the prime rate. With the current recession, I don't see that happening in the next 12 months. I figure rates will remain static until next summer and then you may see a 0.25 to 0.5% increase.... but not more than that (the Bank of Canada won't want to kill any economic turn around that the country will hopefully be enjoying by next summer).
So my plan is, as I said before, to lock in the all time low rate of 2.9% rate for 1 year and then at the end of the year renegotiate my mortgage into a 5 yr term and lock it in at the best 5 year rate I can get (hopefully it will be the same as it is now).
Anybody think the Bank of Canada will be raising its prime rate withing the next 12 months? I don't think they will....
If you were getting a new mortgage right now, what would you do and why?
All your help and your opinions will be greatly appreciated. My mortgage will be approx. $250,000 and a few percentage points makes a big difference in interest paid over the lifetime of a mortgage.
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The thing is, 5 year fixed rates have less to do with what the key overnight rate is as set by the government (and/or prime rate), and more to do with what the rate is on 5 year bonds. Just because the government has committed to keeping the overnight rate at 0.25% doesn't mean that the 5 year rate will stay where it is now.
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The Following User Says Thank You to Jedi Ninja For This Useful Post:
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05-07-2009, 04:16 PM
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#8
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Often Thinks About Pickles
Join Date: Jan 2007
Location: Okotoks
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Quote:
Originally Posted by MickMcGeough
I'm not an expert, but getting anything less than a 5yr fixed would be monumentally stupid, IMO.
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Why do you think that? Do you think it would be a big mistake to wait a year before locking into a 5 yr fixed rate?
Currently the five year rate is approx. 0.69 to 0.99% higher than the best 1 year fixed rate.
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05-07-2009, 04:18 PM
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#9
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Often Thinks About Pickles
Join Date: Jan 2007
Location: Okotoks
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Quote:
Originally Posted by Jedi Ninja
The thing is, 5 year fixed rates have less to do with what the key overnight rate is as set by the government (and/or prime rate), and more to do with what the rate is on 5 year bonds. Just because the government has committed to keeping the overnight rate at 0.25% doesn't mean that the 5 year rate will stay where it is now.
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I see... I didn't realize that. What would cause the 5 yr bond rate to go up in the next 12 months?
One question though... why did all the 5 year rates drop a day or so after the Bank of Canada dropped its prime rate? It does seem like there is some correlation there.
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05-07-2009, 04:19 PM
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#10
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Scoring Winger
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Quote:
Originally Posted by Rerun
Why do you think that? Do you think it would be a big mistake to wait a year before locking into a 5 yr fixed rate?
Currently the five year rate is approx. 0.69 to 0.99% higher than the best 1 year fixed rate.
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Hypothetically, what could happen is, 12 months from now, prime is still where it is now, but the 5 year rate has gone up to 4.8% or something like that.
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05-07-2009, 04:27 PM
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#11
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Often Thinks About Pickles
Join Date: Jan 2007
Location: Okotoks
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Quote:
Originally Posted by Jedi Ninja
Hypothetically, what could happen is, 12 months from now, prime is still where it is now, but the 5 year rate has gone up to 4.8% or something like that.
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Do you feel that a 1% increase in the 5 year fixed rate, is a likely scenario?....
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05-07-2009, 04:27 PM
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#12
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Scoring Winger
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Quote:
Originally Posted by Rerun
I see... I didn't realize that. What would cause the 5 yr bond rate to go up in the next 12 months?
One question though... why did all the 5 year rates drop a day or so after the Bank of Canada dropped its prime rate? It does seem like there is some correlation there.
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There definitely is some correlation, but we are also talking about an environment in which inflation is 0% and where the banks are under a lot of pressure to assist in the stabilization of the economy. It is interesting to note that 7 year mortgage rates are actually higher than when I took out my mortgage in 2005.
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05-07-2009, 04:41 PM
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#13
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Basement Chicken Choker
Join Date: Jan 2007
Location: In a land without pants, or war, or want. But mostly we care about the pants.
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Quote:
Originally Posted by Rerun
Why do you think that? Do you think it would be a big mistake to wait a year before locking into a 5 yr fixed rate?
Currently the five year rate is approx. 0.69 to 0.99% higher than the best 1 year fixed rate.
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The time to get a 1 year rate is when you think rates are going down. Well, the rates definitely won't go down, so you are making an iffy bet on them staying the same or only very slightly increasing. By taking a 5 year mortgage, you are getting the best rates in history and are guaranteed a win - why jeopardize that for the sake of 1 year of slightly smaller payments?
You should be looking at the worst case scenario and comparing it to the best case. In this instance, worst is that rates go up up and up, and you end up paying several percentage points over what you could get now. In the best case, you get the same deal. Even if you weight the cases so that the worst case is very unlikely, I don't see how the marginal return of 1 year's lower payments makes going that route the better decision.
Unless it's froth money (ie - money you can do without or that you've set aside specifically to gamble with), always bet on the sure thing.
__________________
Better educated sadness than oblivious joy.
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The Following User Says Thank You to jammies For This Useful Post:
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05-07-2009, 05:11 PM
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#14
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First Line Centre
Join Date: Oct 2002
Location: Calgary
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Quote:
Originally Posted by Rerun
Why do you think that? Do you think it would be a big mistake to wait a year before locking into a 5 yr fixed rate?
Currently the five year rate is approx. 0.69 to 0.99% higher than the best 1 year fixed rate.
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"monunmentally stupid" was probably a bit strong. You should be able to get 3.75 from a big lender right now on a 5yr fixed. It's safe to say it isn't going lower but over 5 years won't you lose a lot more if rates climb even a bit before locking than you would save preceding it with a 1yr fixed?
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05-07-2009, 05:12 PM
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#15
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First Line Centre
Join Date: Oct 2002
Location: Calgary
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Quote:
Originally Posted by Rerun
Do you feel that a 1% increase in the 5 year fixed rate, is a likely scenario?....
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Even if they go up .25%, don't you lose?
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05-07-2009, 05:19 PM
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#16
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The new goggles also do nothing.
Join Date: Oct 2001
Location: Calgary
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The brokers I've spoken with are saying to start thinking about locking in variables if you have them or taking fixed if you are getting new mortgages. They said the next while will stay low, but after that...
Normally I like variable, but this might be one time I'll go with fixed for a while.
__________________
Uncertainty is an uncomfortable position.
But certainty is an absurd one.
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05-07-2009, 05:30 PM
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#17
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Lifetime Suspension
Join Date: Jul 2002
Location: In front of the Photon Torpedo
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There is a Real Estate show done locally here called Makin' Stupid Money. While the content is boring at times they have some great guests. I believe this next one is on mortgages.
No matter what you think about me. I'm not selling this shizzle.
There is a guy named Mark Herman who has a masters in economics or something related to finance and is a mortgage broker who frequents this show. Great speaker and breaks everything down in a simple way for everyone to understand. Also it's local content so you'll get something specific to Calgary.
I think it's on Sunday at 12:30pm.
http://www.homeruninvestments.com/
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05-07-2009, 05:34 PM
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#18
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Lifetime Suspension
Join Date: Jul 2002
Location: In front of the Photon Torpedo
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Quote:
Originally Posted by photon
The brokers I've spoken with are saying to start thinking about locking in variables if you have them or taking fixed if you are getting new mortgages. They said the next while will stay low, but after that...
Normally I like variable, but this might be one time I'll go with fixed for a while.
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Mark Herman say's the market will stay the same for about 12 months or so. Then the trading will start from Canada to other nations and the economy will recover here first. Thus increase the interest rate.
Professional Education
• Bachelor of Commerce - University of Calgary
• Master of Business Administration, Focus: Finance - Herriot-Watt Business College, University of Edinburgh.
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05-07-2009, 06:36 PM
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#19
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The new goggles also do nothing.
Join Date: Oct 2001
Location: Calgary
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If someone could actually predict these things, they wouldn't be giving seminars, they'd be in Barbados rolling around in their big pile of money.
__________________
Uncertainty is an uncomfortable position.
But certainty is an absurd one.
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05-07-2009, 08:47 PM
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#20
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Lifetime Suspension
Join Date: Jul 2002
Location: In front of the Photon Torpedo
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Quote:
Originally Posted by photon
If someone could actually predict these things, they wouldn't be giving seminars, they'd be in Barbados rolling around in their big pile of money.
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lol true.
But She's worth around 15 million and tried to retire but didn't like the way banks were stealing money from "you and me" through long interest payments. So she's doing a great service! And for her efforts also getting a little on the side. And does an amazing job at predicting the market over the last 10 years.
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