Quote:
Originally Posted by dubc80
Ok, seems to be lots of good banter in here among people more knowledgeable than me.
So... here goes!
Currently on a variable mortgage at prime minus 1.26%.
My rate has climbed from 1.19% in March to 4.19% currently.
4 years left in my term.
They are offering 5.14% for 5-year fixed.
What do you experts say? Convert? Or ride it out?
Fortunately for our family, we are not one of those families who took the max mortgage available and live well within our means. Variations in payment are annoying, but not crippling.
|
There are several economic papers that suggests that variable rate mortgages are lower cost in real dollars over time. So the question becomes a) do you believe you are smarter than the bond markets or can you afford the downside risk.
If you can afford the down side risk then variable is likely better because you are not smarter than the bond markets. If you would be seriously hurt by 3% more then maybe you lock in.
Normally I would take my own advice but during the pandemic I renewed on fixed to lock in a stupidly low rate for 4 years but then it’s back to variable.
We are headed into an uncertain period of time where we could have overshot interest rates already resulting them dropping in the next 2-3 years or we could be in for a long term inflation fight. The usual best option in personal finance is never try to beat the market.