*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[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.

[Yoho]

https://twitter.com/user/status/1722362110922084545

[burn_this_city]

The Canadian dollar says otherwise in my opinion, it's been declining a ton lately because the US Fed is far more hawkish. Rest of Canada is already potentially in a recession, I suspect the variable rate is probably the better choice at this point.

[Elkyiv]

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'm in the same shoes. Have those 2 exact options but also throwing in a 3 year fixed rate at 6.14% into play and reevaluating in 3 years.

The payments themselves differ marginally, but over the course of the term, it's definitely noticeable.

[opendoor]

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.

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.

[Yoho]

https://twitter.com/user/status/1723018983408853331

[Leondros]

Lol, in the finance world "forever" should never be used. People 3 years ago were saying lower "forever" as well. You hear it all the time with commodity prices to. The truth is no buddy knows what going to happen and even the best and smartest forecasters get it grossly wrong.

If it were me I would look at your cash flows, your risk tolerance and see what you can afford. If you cannot tolerate rates coming up another 1 - 2% on a variable, look at fixed for the short term and re-evaluate in 1 or 2 years (ie. short term fixed).

[Bill Bumface]

I still remember "oil will never be under $100 again" during a company town hall ~15 years ago.

[bizaro86]

Originally Posted by Leondros

Lol, in the finance world "forever" should never be used. People 3 years ago were saying lower "forever" as well. You hear it all the time with commodity prices to. The truth is no buddy knows what going to happen and even the best and smartest forecasters get it grossly wrong.

If it were me I would look at your cash flows, your risk tolerance and see what you can afford. If you cannot tolerate rates coming up another 1 - 2% on a variable, look at fixed for the short term and re-evaluate in 1 or 2 years (ie. short term fixed).

I would hope people learned not to trust the BoC statements about thr future when making mortgage decisions.

[Mr.Coffee]

Originally Posted by Bill Bumface

I still remember "oil will never be under $100 again" during a company town hall ~15 years ago.

Lol really?! That’s hilarious. It literally went to $0 during COVID.

Companies would be wise to not forget to build in multiple layers of resilience into their businesses and not over-hire like in years past.

[powderjunkie]

Originally Posted by bizaro86

I would hope people learned not to trust the BoC statements about thr future when making mortgage decisions.

I doubt there are more than a dozen people in the entire country who now claim they were misdirected by those infamous BOC statements actually read them and let them inform their decision making.

Anyone who was tuned into those statements would have been tuned in to the changing market conditions and subsequent statements and reacted accordingly.

[topfiverecords]

Originally Posted by Mr.Coffee

Lol really?! That’s hilarious. It literally went to $0 during COVID.

Companies would be wise to not forget to build in multiple layers of resilience into their businesses and not over-hire like in years past.

[bizaro86]

Originally Posted by powderjunkie

I doubt there are more than a dozen people in the entire country who now claim they were misdirected by those infamous BOC statements actually read them and let them inform their decision making.

Anyone who was tuned into those statements would have been tuned in to the changing market conditions and subsequent statements and reacted accordingly.

I think just like in this case lots of people read/watched commentary on their statements and tried to use it to make decisions.

And just like in that previous case the BoC statements should be taken with a big grain of salt. Rates will be high until they decide they need to lower them. Everything else is just talk and you are almost certainly better off ignoring it.

[Yoho]

Originally Posted by bizaro86

I think just like in this case lots of people read/watched commentary on their statements and tried to use it to make decisions.

And just like in that previous case the BoC statements should be taken with a big grain of salt. Rates will be high until they decide they need to lower them. Everything else is just talk and you are almost certainly better off ignoring it.

Depends how you value a good nights sleep compared to people who took variable the last two years or so.


I’d sure be interested in what the bank of Canada is saying over CP internet experts.

[bizaro86]

Originally Posted by Yoho

Depends how you value a good nights sleep compared to people who took variable the last two years or so.


I’d sure be interested in what the bank of Canada is saying over CP internet experts.

The people who listened to all the commentary from the BoC about how rates would be low for a long time? I agree some of them are in trouble.

I certainly haven't made a recommendation, other than to think for yourself and not place very much weight on commentary about what the BoC is saying. They're trying to jawbone the market into doing what they want, not give you mortgage advice.

[Slava]

Originally Posted by Yoho

Depends how you value a good nights sleep compared to people who took variable the last two years or so.


I’d sure be interested in what the bank of Canada is saying over CP internet experts.

A couple things on this though. First, the rate decisions and commentary are a relatively new thing. Particularly in the US (but it applies increasingly here), these heads of the central banks should stay out of the spotlight. (That’s my opinion, to be clear). They add almost nothing with useful with the comments and statements, and keeping quiet would be more helpful.

Second though, about CP, there are a lot of smart people here and experts in their fields. I’m not going to out anyone, but I’ve met enough people here to know that. A lot of the board is well educated, experienced and just has a lot of knowledge about their industry. I wouldn’t be so quick to dismiss everything here as some “guy on the internet who is talking out his ass” because a lot of people here are the real deal.

[Yoho]

Originally Posted by Slava

A couple things on this though. First, the rate decisions and commentary are a relatively new thing. Particularly in the US (but it applies increasingly here), these heads of the central banks should stay out of the spotlight. (That’s my opinion, to be clear). They add almost nothing with useful with the comments and statements, and keeping quiet would be more helpful.

Second though, about CP, there are a lot of smart people here and experts in their fields. I’m not going to out anyone, but I’ve met enough people here to know that. A lot of the board is well educated, experienced and just has a lot of knowledge about their industry. I wouldn’t be so quick to dismiss everything here as some “guy on the internet who is talking out his ass” because a lot of people here are the real deal.

Agreed all of whom will be no where to be found when you choose unwisely.
It’s easier to gamble on someone else’s mortgage.

[Slava]

Originally Posted by Yoho

Agreed all of whom will be no where to be found when you choose unwisely.
It’s easier to gamble on someone else’s mortgage.

What do you mean by this? I’m not sure I follow.

[Yoho]

Originally Posted by Slava

What do you mean by this? I’m not sure I follow.

It’s such and individual decision picking fixed or variable . Im very hesitant giving or getting advice on it because of the ramifications.
I understand the advice is given with good intentions though.

But it’s easy for someone else to be confident in what you should be doing.

[Slava]

Sure, but the BoC isn’t giving that advice either. They’re saying their piece in a super general manner.