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Originally Posted by calgarygeologist
What are some thoughts on mortgage rates for upcoming renewals? I have to renew my mortgage next month and was offered 5 years fixed at 5.69% or 5 year variable at prime minus 1 (6.2% currently.) Essentially two rate decreases of a quarter percent brings the variable inline with the fixed and it might be conceivable that the prime rate starts dropping at some point next year. I also asked about shorter fixed but 2 years is 7.14% and three years at 6.59% which don't seem very attractive.
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Depending on the loan-to-value ratio and whether or not it's insurable (under $1M purchase price or bought pre-2016), you might be able to get better rates than that if you shop around.
In terms of fixed vs variable, of those 2 options I'd probably go variable. And that's as someone who has gone fixed the 2 times I've gotten mortgages. I renewed about 6 months ago and went fixed, but in that case it was 4.29% fixed vs. 6.2% variable which made the choice easier. At 5.69%, the math is a lot different because of such a narrow spread. And that assumes that you can sustain higher rates in the worst case scenario.
For what it's worth, bond markets are pricing in cuts in 2024, and not just in Canada. Even in the US, the market is predicting an 85% chance of rates being at least 50 bps lower than now by next fall. In Canada the market is predicting more like 75-100 bps down by then. They've been wrong before (this year, even) but most signs are pointing to cuts in the next year or two.