*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[The Fonz]

Originally Posted by Azure

Is that because people are just naive? Lots of opportunity within a 10 year period to sign a loan at 2% interest rates. Why not go for the max length?

I've never seen a 10yr term at anything approaching a 2% interest rate. Not to say it doesn't exist. I just haven't seen it.

Don't think I've ever seen a 10yr that was sub-4%, even during the times we were seeing 2.0-2.5% rates on 5yr fixed.

[Fuzz]

Originally Posted by The Fonz

I've never seen a 10yr term at anything approaching a 2% interest rate. Not to say it doesn't exist. I just haven't seen it.

Don't think I've ever seen a 10yr that was sub-4%, even during the times we were seeing 2.0-2.5% rates on 5yr fixed.

According to this they got that low in 2020/2021 briefly.


https://www.ratehub.ca/10-year-fixed...e-rate-history

[blankall]

Originally Posted by Azure

Is that because people are just naive? Lots of opportunity within a 10 year period to sign a loan at 2% interest rates. Why not go for the max length? Never understood the variable rate thinking.

Variable rates have historically led to lower payments than fixed. That obviously doesn't happen when you have a massive jump up, like last year. In people's defence, the BoC was telling people they intended to keep rates down for a while.

If I was renewing today, I'd definitely go variable. There's about a 1.1% spread between fixed and variable. We should make that gap up pretty swiftly.

[mrkajz44]

My renewal is in Nov and I'm not sure what to do:

1) 5 year variable with a good chance that beats out the fixed rates now
2) 6 month fixed convertable with a decent chance fixed rates drop 0.5 - 1.0% by mid-next year

[Azure]

Originally Posted by Fuzz

Because individuals don't have much hope in predicting long term rates. If I had gone on a 10 year on my first mortgage I'd have paid around 6%, vs the ~4.55% I got for 4 years. But then I'd have missed the declining rates that had me down to ~2.9%. So a lot of money left on the table.

I mean that generally within 10 years there is a period of time where the rates fluctuate down to 2-3%. Lots of people have the opportunity to sign for a longer term at that point and still go variable rate for some reason.

[Azure]

Originally Posted by blankall

Variable rates have historically led to lower payments than fixed. That obviously doesn't happen when you have a massive jump up, like last year. In people's defence, the BoC was telling people they intended to keep rates down for a while.

If I was renewing today, I'd definitely go variable. There's about a 1.1% spread between fixed and variable. We should make that gap up pretty swiftly.

Well yeah, now you would go variable, but in 2-3 years it is likely that rates are going to be at another low period, so if there a chance to renew for max length at that time wouldn't you do it?

[Winsor_Pilates]

Originally Posted by mrkajz44

My renewal is in Nov and I'm not sure what to do:

1) 5 year variable with a good chance that beats out the fixed rates now
2) 6 month fixed convertable with a decent chance fixed rates drop 0.5 - 1.0% by mid-next year

Word on the street is the overnight rate likely hits 3% by end of next year (currently 4.25%).

[blankall]

Originally Posted by Azure

Well yeah, now you would go variable, but in 2-3 years it is likely that rates are going to be at another low period, so if there a chance to renew for max length at that time wouldn't you do it?

I went fixed with my last two mortgages, as things were really low. Only for 5 years. After having lived through this latest experience, I'd definitely go for a 10 year fixed if things ever got to around 2.5% on a 10 year again.

You have to weigh the value of certainty in your bill payments.

Right now though, I'd go variable. My current mortgage holder, CIBC, has a .8% spread between variable and fixed. I see rates going below .8% of where they are now.

[opendoor]

Originally Posted by Winsor_Pilates

Word on the street is the overnight rate likely hits 3% by end of night year (currently 4.25%).

That'd be pretty extreme, given that there are only 2 meetings left this year. A 0.75% drop in a single meeting is pretty rare and has only happened once in the last 20 years. Back when rates were higher they were a bit more common, but that kind of movement is probably only going to happen if things really fall apart.

[Jason14h]

Originally Posted by Winsor_Pilates

Word on the street is the overnight rate likely hits 3% by end of night year (currently 4.25%).

whats night year or was this a typo?

Zero chance they are 3% by end of 2024. Zero.

[Winsor_Pilates]

Originally Posted by opendoor

That'd be pretty extreme, given that there are only 2 meetings left this year. A 0.75% drop in a single meeting is pretty rare and has only happened once in the last 20 years. Back when rates were higher they were a bit more common, but that kind of movement is probably only going to happen if things really fall apart.

Originally Posted by Jason14h

whats night year or was this a typo?

Zero chance they are 3% by end of 2024. Zero.

Night Year typo = Next Year

[GGG]

Originally Posted by Azure

Is that because people are just naive? Lots of opportunity within a 10 year period to sign a loan at 2% interest rates. Why not go for the max length? Never understood the variable rate thinking.

Quite simply locking in transfers risk from you to the bank. In general you pay a premium for other people to take on risk. So in the absence of your lifestyle being significantly impacted if your variable rate rises over time you are better off taking variable.

I will add that when rates hit the lowest levels ever during a pandemic the above probably does not apply and locking in to mitigate risk probably made sense.

In the US the Fed subsidizes 30 year rates and the terms and conditions for leaving and refinancing so longer term fixed rates at reasonable rates are available that Canadians don’t have access to.

[mrkajz44]

Originally Posted by blankall

I went fixed with my last two mortgages, as things were really low. Only for 5 years. After having lived through this latest experience, I'd definitely go for a 10 year fixed if things ever got to around 2.5% on a 10 year again.

You have to weigh the value of certainty in your bill payments.

Right now though, I'd go variable. My current mortgage holder, CIBC, has a .8% spread between variable and fixed. I see rates going below .8% of where they are now.

I think this much is clear - however, you'll pay higher than the fixed rate for at least several months before you dip below, so at best you are probably breaking even around 1.5 years or so? And then rates have to stay lower in order for it to pay off.

Might be the worse decision long term, but I'm tempted just want to lock in around 4% right at renewal for a 5 year term and then don't worry at all about the moving rate. The piece of mind could be worth it.

[GGG]

Originally Posted by blankall

I went fixed with my last two mortgages, as things were really low. Only for 5 years. After having lived through this latest experience, I'd definitely go for a 10 year fixed if things ever got to around 2.5% on a 10 year again.

You have to weigh the value of certainty in your bill payments.

Right now though, I'd go variable. My current mortgage holder, CIBC, has a .8% spread between variable and fixed. I see rates going below .8% of where they are now.

During Covid you had to pay .75% or so premium to go between 5 and 10 year terms. Next September thru March would be the renewal of the lowest rates. So with that .75% benefit early on a a 25 year mortgage will still be marginally better at +1% over the next 5 years. So will rates drop 2% over the next year? That doesn’t seem unreasonable and you just go variable.

So the 10 yr rate even in the best condition to take a 10 yr rate you could envision likely ends up pretty close to even with 5yr then back to variable.

[indes]

My last renewal I went 5yr fixed at 1.69 - I shopped for a 10 year and 4.5 was the lowest I could find.

[GreenLantern]

Currently at 4.89. Never got in on this good stuff of 1.2% or whatever by the time I renewed this was the best there was.

Mortgage is up November 1. Same as many I am trying to figure out what the right move here is.

Open variables are pretty pricey. I mean if I just lock in again at the same rate (which is what is being offered to me right now) at least I know my payment stays the same and my budget is good to go.

Sure would be nice to slim even a few hundred bucks off there though a month if I could.

[The Fonz]

The Federal Reserve decided on a 50bps rate cut today.

[fundmark19]

Originally Posted by GreenLantern

Currently at 4.89. Never got in on this good stuff of 1.2% or whatever by the time I renewed this was the best there was.

Mortgage is up November 1. Same as many I am trying to figure out what the right move here is.

Open variables are pretty pricey. I mean if I just lock in again at the same rate (which is what is being offered to me right now) at least I know my payment stays the same and my budget is good to go.

Sure would be nice to slim even a few hundred bucks off there though a month if I could.

Closed variable should be a good option for you. Better rates than open and a great way to ride these next rate drops down and you can always lock into a 5 year fixed for free with your lender if fixed rates come down as well.

[Sylvanfan]

Originally Posted by Winsor_Pilates

Word on the street is the overnight rate likely hits 3% by end of next year (currently 4.25%).

A lot of the forecasts I have seen have been between 2.5 optimistic and 3 at the high end. Most are about 2.75 by November of 2025. Still if you're a weak earner with sketchy credit and can only borrow at Bank prime-1% like me...that's still 4.1 which is double what a lot of people are paying right now. If you only have 5 years left on your mortgage it's not that bad. If you have 20...you will feel some pain.

[powderjunkie]

Originally Posted by blankall

That's a 2% fall in the next 9 months, CIBC is predicting.

As someone renewing in August 2025, all I can say is: