Should I fix or should i stay Variable ??

[albertGQ]

variable is almost always better. You can get P-0.75% out there right now.

[IliketoPuck]

Originally Posted by albertGQ

variable is almost always better. You can get P-0.75% out there right now.

Shop around a bit. There are better rates to be had.

[stampsx2]

Originally Posted by IliketoPuck

My 2 cents (and worth what you've paid for it):

1. The BOC would look foolish if they raised interest rates so shortly after reducing them. It signals that they do not have an adequate handle on what is required to achieve monetary goals. Tough to act as the calm, stabilizing force in the economy when you change your mind every 2 months.

2. Monetary policy typically takes 6-8 quarters to filter through an economy and fully provide the effects the BOC is looking for.

3. With the economy currently struggling, an argument could be made for additional rate cuts.

4. My personal decision is to remain on a floating rate, and monitor the messaging from the BOC closely in tandem with Canadian economic indicators. At this time, in my opinion, rates are unlikely to increase in the near term.

Problem is rates don't have much further down to go. They're almost at the floor and banks aren't making much. After that it's quantative easing i guess.

[I-Hate-Hulse]

Am going through a refi process right now and the best full featured variable rate I can get is 2.05%. Thought about a 2 yr fixed but the far better break fees of a VRM is something important to me.

[DownhillGoat]

I'm sitting at 2.1 right now on a variable (IIRC). I'm in the same boat as IliketoPuck. I'll watch rates, but I'm not going to lock in now. I can't see them going up anytime soon.

[fundmark19]

Rates are also projected to go down in Sept/October so Variable now then you can always lock in from Variable to fixed at anytime with minimal penalty

http://business.financialpost.com/in..._lsa=47ac-eafd

[Fighting Banana Slug]

I am looking at this closely as well. Although it seems unlikely that rates can go down much further, I think the key in the analysis is whether you think they are going up in the short term. If you think not, then you might as well stay variable, as those rates are low and you can always lock in later when you think the rates will rise.
Edit: I am assuming you have a variable that you can lock-in anytime. That might not be the case!

[foshizzle11]

so, from my understanding is when you lock into a fixed when you see the variable rate rising, you don't get to keep your variable rate on a fixed mortgage. They offer you what the current fixed options are. So you could go from 2.0% variable and say it starts climbing up to 3.0% and you want to switched to fixed, you might be looking at 3.5% for a fixed.

I don't think it is as easy as just switching from variable to fixed. I thought it was but maybe an expert can chime in here.

[foshizzle11]

double post

[Fighting Banana Slug]

No expert by any measure, but I think what you stated is correct. You don't "fix" your low variable rate, but you would switch it to fixed, which might be a few points higher (in theory, the fixed could be lower).
Basically trading a slightly lower rate now, for some certainty that your rate will not change for whatever term you choose.
I recall a study that indicated variable rates were lower than fixed 18/20 periods, which indicates that staying variable is almost always cheaper in the long run. However, if you are risk adverse and can sleep better at night knowing your rate over the next 5-10 years, I can't criticize a decision to switch.

[stampsx2]

Originally Posted by foshizzle11

so, from my understanding is when you lock into a fixed when you see the variable rate rising, you don't get to keep your variable rate on a fixed mortgage. They offer you what the current fixed options are. So you could go from 2.0% variable and say it starts climbing up to 3.0% and you want to switched to fixed, you might be looking at 3.5% for a fixed.

I don't think it is as easy as just switching from variable to fixed. I thought it was but maybe an expert can chime in here.

That's just it. Once you're variable closed you won't get a preferred rate when you're ready to switch to a fixed term. Not without a penalty anyway.

[foshizzle11]

ya, we decided to lock in at 2.69% for 5 year fixed. That way we know we will be paying the same mortgage by-weekly for at least 5 years. Maybe next time we renew we might go variable. I like the security for sure knowing it will be the same payment.

However, I don't know anyone who has had trouble with their variable mortgage and over the last 10 years the rates have been really good. So who knows!!

[MillerTime GFG]

The Bank of Canada is meeting again on September 9th, and there is a strong possibility they will be cutting rates again. Let's assume they cut the overnight by another quarter percent. Let's also assume lenders will adjust their prime lending rates by 0.15 as they have the last two rate cuts. Prime rates will then be at 2.55%. As some have mentioned, you can get full featured variable rates in the prime - 0.65-0.70% range, and restricted rates in the prime - 0.75-0.80%, you'll be looking at current rates comfortably below the 2% mark.

I'd hang tight if you're in a variable mortgage as there are definite savings to be had in the short-term. If (when) the economy starts to recover, with that kind of spread, you can absorb a couple interest rate hikes, or look at locking in your mortgage at that point. You will have saved quite a bit of money in the meantime.

Keep in mind that when locking your variable mortgage into a fixed, you're going to most likely be locking into lenders' posted rates, which are going to be higher than the fixed rates you're currently seeing. Of course at that point you can run some calculations to see if it makes sense to pay your 3 month interest penalty (if you have a full feature mortgage) to secure those best fixed rates, but I digress...

[ranchlandsselling]

People should also know that fixed and variable don't necessarily change in tandem.

Fixed is based on a premium above the corresponding bond market (5 year term, 5 year bond, 10 year term, 10 year bond) which can change at any time even based on what is happening outside of Canada in the US or the stock market. Variable however is based on a bank pricing below prime. Prime of course is set by the Bank of Canada (pending the lender making adjustments). Prime will likely never move as quickly as the bond market can and the BOC will be slow and cautious to adjust upwards. The same cannot be said for the bond market. If traders/investors catch wind of change in the economy, markets, etc. the bond market can change fast and drastically which will quickly change fixed rates.

Lenders can't adjust their discount on the BOC prime rate but typically it's not drastic.

[V]

So on ratehub I can get a 5 year fixed mortgage at 2.35% or a 5 year variable at 1.84%. Going by that, I would only lose on variable if Prime goes up by a full percent in less than 2.5 years, basically, to keep it simple.

It looks to me like something like that has only happened once since 1994.

That said, I have a family and a large mortgage, so locking in at half a percent higher right now is probably worth some piece of mind.

[foshizzle11]

The way I see it is, we don't know what the economy will be like in 5 years. We weren't sure we would be in a recession in 2015 after some bright times a few years ago. I don't see those rates getting any lower personally, that is the main reason we locked into the fixed for 5 years.

2.35% seems pretty damn good for a 5 year fixed.

[kevman]

Originally Posted by V

So on ratehub I can get a 5 year fixed mortgage at 2.35% or a 5 year variable at 1.84%. Going by that, I would only lose on variable if Prime goes up by a full percent in less than 2.5 years, basically, to keep it simple.

This. Assuming you put the savings aside while you're ahead you can absorb the spread when you're behind. Assuming you put the savings aside....

As someone with a current variable at 1.8% I can safely say that I certainly haven't put the savings aside.

[stampsx2]

Originally Posted by V

So on ratehub I can get a 5 year fixed mortgage at 2.35% or a 5 year variable at 1.84%. Going by that, I would only lose on variable if Prime goes up by a full percent in less than 2.5 years, basically, to keep it simple.

It looks to me like something like that has only happened once since 1994.

That said, I have a family and a large mortgage, so locking in at half a percent higher right now is probably worth some piece of mind.

Exactly what i'm thinking. I think you put in your assumption that you'll get the posted rate at 2.5 years of 3.35%. That's a long time to watch to markets.

[cral12]

Going through this process now as well as we are up for mortgage renewal.

Just read recently that one so-called expert stated that if difference between variable and fixed is less than 1%, he recommended going fixed.