*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[MrCallahan]

Originally Posted by powderjunkie

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

Dec 2025 checking in - watching with exact same reaction!

[iggy_oi]

September 2025 over here, looks like this renewal is gonna come down to the wire.

[DoubleF]

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.

Hindsight is different though. If the offer was 2% and you locked in 10 years at 3%, that extra 1% means $1000 per $100K in mortgage. For a $500K mortgage, that's an extra $5K a year compounding. You'd have to be certain that the average savings is 1% or more for more than half the mortgage and that's complicated by the concept of TVM.

Certainty is one thing, but IMO not at those costs. It might make more sense if you had a lower (ie: <$400K) mortgage outstanding, but at that point, you're better off aiming for an aggressive 5-10 year payment and lump sum plan to pay off the mortgage for the certainty of no more mortgage payments IMO.

0.5% doesn't seem like a lot, but on a $500K mortgage, that's still $2500 or a little over $200 per month.

[Erick Estrada]

With my wife and I separating, I am keeping the house and hoping to assume the last year of our current mortgage at 1.79% as that would buy me a year. Hoping the bank doesn't screw me around here as financially there's no issues with me paying the current monthly payments on my own.

[blankall]

Originally Posted by DoubleF

Hindsight is different though. If the offer was 2% and you locked in 10 years at 3%, that extra 1% means $1000 per $100K in mortgage. For a $500K mortgage, that's an extra $5K a year compounding. You'd have to be certain that the average savings is 1% or more for more than half the mortgage and that's complicated by the concept of TVM.

Certainty is one thing, but IMO not at those costs. It might make more sense if you had a lower (ie: <$400K) mortgage outstanding, but at that point, you're better off aiming for an aggressive 5-10 year payment and lump sum plan to pay off the mortgage for the certainty of no more mortgage payments IMO.

0.5% doesn't seem like a lot, but on a $500K mortgage, that's still $2500 or a little over $200 per month.

Fair enough....and our mortgage was a lot more than $500k when it started. Not up for renewal until June of 2026, so we'll see where things are.

[iggy_oi]

Originally Posted by Erick Estrada

With my wife and I separating, I am keeping the house and hoping to assume the last year of our current mortgage at 1.79% as that would buy me a year. Hoping the bank doesn't screw me around here as financially there's no issues with me paying the current monthly payments on my own.

If your credit is good and you meet the requirements you should be able to have her name removed from the mortgage once a division of property and any spousal/child support orders are finalized. If you and your wife are both at least somewhat amicable, depending on her plans she could also just allow her name to remain on the mortgage until it is up for renewal.

Sorry you’re having to go through this, it’s a pain.

[Iggy_12]

My current rate is 2.34 I locked into a 5 year fixed that is set to renew in April 2025. Feel like I am right in the middle so I am looking for advice. Do i sign a variable mortgage and wait for rates to come down even more as predicted by the end of 2025 then switch over to a fixed when it gets somewhat close to my current rate?

All this stuff seems pretty confusing. To add to the confusion like Erik, i am going through a separation, i had been pre approved to take over the mortgage myself, is it as simple as just assuming the remaining portion of the mortgage or do i do nothing until April? I have a separation agreement from the lawyers, do I just take that to my bank get approved and mortgage doesnt change until its time for renewal in April?

[iggy_oi]

Originally Posted by Iggy_12

My current rate is 2.34 I locked into a 5 year fixed that is set to renew in April 2025. Feel like I am right in the middle so I am looking for advice. Do i sign a variable mortgage and wait for rates to come down even more as predicted by the end of 2025 then switch over to a fixed when it gets somewhat close to my current rate?

All this stuff seems pretty confusing. To add to the confusion like Erik, i am going through a separation, i had been pre approved to take over the mortgage myself, is it as simple as just assuming the remaining portion of the mortgage or do i do nothing until April? I have a separation agreement from the lawyers, do I just take that to my bank get approved and mortgage doesnt change until its time for renewal in April?

It depends on what your agreement says. I would contact your bank, they’ll know what you need to have.

[DoubleF]

Originally Posted by Iggy_12

My current rate is 2.34 I locked into a 5 year fixed that is set to renew in April 2025. Feel like I am right in the middle so I am looking for advice. Do i sign a variable mortgage and wait for rates to come down even more as predicted by the end of 2025 then switch over to a fixed when it gets somewhat close to my current rate?

All this stuff seems pretty confusing. To add to the confusion like Erik, i am going through a separation, i had been pre approved to take over the mortgage myself, is it as simple as just assuming the remaining portion of the mortgage or do i do nothing until April? I have a separation agreement from the lawyers, do I just take that to my bank get approved and mortgage doesnt change until its time for renewal in April?

I feel like fixed will be an easy answer for April 2025 renewal. I'm not sure how much of the anticipated rate drops are locked in by April 2025 and how much further it has to go from April until a next renewal. You'd want to redo the calculation and compare with the projections at that time. It's not like right now where we're looking at almost 2%, but we're expecting maybe 0.5% of that (25%) to happen by calendar year end.

When I did the napkin math for my situation (renewal before calendar year end), it started feeling like lenders were just making it seem like I had a choice. In reality, the models they used to post the current fixed and variable rate differences of 0.8-1.2% higher initially kinda project to end up relatively negligible by the end of a 3 year term. I'll pay probably on average 1% more than fixed for the front 18 months and then I have to hope I'm getting more than 1% savings on the back half 18 months of the 3 year term.

Keep in mind, you can't do this calculation using historical info. The last 3-5 years have had some crazy unanticipated fluctuations in the interest rates.

I'm anticipating an absolute worst case scenario where I may end up paying $3-5K more in interest on fixed over that 3 years on a $400K ish mortgage. That's $1-1.5K a year average, but it comes with certainty. It's not the end of the world if this is the end result. I get crushed worse than that in the stock market on a bad year. I'm optimistic a real difference would be less than that though, maybe like $500 a year average. I'm not going to bother doing that calculation once my 3 year terms is over.

Your call on what you want to do. Sorry to hear you're going through a separation. If it were me, I'd do fixed solely because I assume I'd have a lot on my mind that I'd rather address over that 3 years rather than have to be aware of mortgage rates over those same 3 years.

Unless there's a requirement to do so, (ie: they demand it) I think you can also just wait till renewal to remove your spouse's name off the mortgage. It doesn't hurt to just email your lender and ask what they recommend and what info/docs are required.

[blankall]

Originally Posted by Iggy_12

My current rate is 2.34 I locked into a 5 year fixed that is set to renew in April 2025. Feel like I am right in the middle so I am looking for advice. Do i sign a variable mortgage and wait for rates to come down even more as predicted by the end of 2025 then switch over to a fixed when it gets somewhat close to my current rate?

All this stuff seems pretty confusing. To add to the confusion like Erik, i am going through a separation, i had been pre approved to take over the mortgage myself, is it as simple as just assuming the remaining portion of the mortgage or do i do nothing until April? I have a separation agreement from the lawyers, do I just take that to my bank get approved and mortgage doesnt change until its time for renewal in April?

Get in touch with your lender ASAP. They may allow an assumption, which will be you taking over the mortgage, which is the far better option, especially with a low locked in rate.

They may want you to break the existing mortgage and reapply. That means higher rates now plus fees to break the existing mortgage. If this is the case, you may want to talk to your spouse about keeping her name on the mortgage until your current 5 year term is up. This means her continuing to be liable for the mortgage though.

Depends on what the contract says and the individual banks polices and the relationship you have with the bank.

[opendoor]

One thing to keep in mind for fixed rates is that they price in a lot of the expectations that exist. For instance, 5-year bond yields (on which the 5-year fixed rates are based) are currently ~2.7%. With a 4.5% policy rate right now, that bond yield is anticipating a lot of future cuts, so much of the movement in the next year or two is priced in based on the expectations.

Now expectations can obviously change based on new evidence, but based on what we know now, I wouldn't assume that fixed rates will decline significantly even if we see quick rate drops. For bond yields to show a considerable drop from where they are now, traders would have to be convinced that either rates are going way, way down (i.e. sub 1.5-2%), or that they're going to stay low for a long time.

2007-08 is a good example. Even despite all the calamity, 5-year bond yields took several years to adjust to the new reality of near-zero rates. For a while there in 2009-2010, they had a 0.25% policy rate with 2.5% bond yields. In that environment, you could get a variable rate that was 1-1.5% while fixed rates were still over 4%.

[Iggy_12]

Thanks for all the information, really appreciate it!

DoubleF you would recommend a 3 year fixed in my situation hey? Any idea what I could expect as far as rates? (I know this is still a ways out, just curious)

Thanks again!

[fundmark19]

Originally Posted by Iggy_12

Thanks for all the information, really appreciate it!

DoubleF you would recommend a 3 year fixed in my situation hey? Any idea what I could expect as far as rates? (I know this is still a ways out, just curious)

Thanks again!

Depends on many variables! Did you originally pay CMHC insurance? What is your current mortgage balance vs homes value

[DoubleF]

Originally Posted by Iggy_12

Thanks for all the information, really appreciate it!

DoubleF you would recommend a 3 year fixed in my situation hey? Any idea what I could expect as far as rates? (I know this is still a ways out, just curious)

Thanks again!

Take my suggestion with a huge grain of salt. I meant that if I were in your shoes, I'd personally value certainty over variation. I also meant that the extra paid by choosing fixed over variable IMO wouldn't be back breaking even if all of the forecasts are perfectly accurate.

Others will probably laugh at me and say that it's pretty obvious rates are falling, so variable is the best choice. But around 2022 I wasn't aware that it was common knowledge that the BOC would blow up the rates to curb inflation either.

https://wowa.ca/interest-rate-forecast

According to this forecast, if between December and June 2025, you might be looking at 3 year rates at basically 4% with a 5 year variable approximately 4.7% which is 0.7% higher.

A few months later by June 2025, it could be as low as 3.7% for variable (saving 0.3%) and dropping towards 3.45% by December (saving 0.55%) which let's say it's pretty consistent until the end of the 3 years vs (locked in until 2028 at 4%).

Napkin math:

Assuming an average of $400K mortgage outstanding over 3 years (eliminates TVM):

Fixed at 4% on the average outstanding for 3 years is $48K ($400K x 4% x 3).
An average of approximately 3.5% on the average outstanding is $42K ($400K x 3.5% x 3).

That's an approximate difference of 6K total or $2K a year on average savings for variable over 3 years if that forecast is totally accurate and there's nothing that happens that sways things in the other direction (obviously just minor. I'm not assuming anything as extreme as 2022 and 2023).


DoubleF, you've totally done math to say variable is better than fixed.... Yes, I know. But what we've gone through in the last 4 years was also unimaginable 5 years ago.

One thing I've found exceptionally odd is that since the summer, I was chatting with a mortgage broker (hopefully reduces bias) and a lender at a major bank (perhaps bias for their bank) both kinda felt it kinda made sense to choose 3 year fixed to ride things out and see what truly happens. I've dealt with both guys before the pandemic and they didn't hesitate to say variable has pros and cons. It kinda makes me nervous they're openly saying they believe rates will fall, but are more hesitant to discuss the pros and cons of variable mortgage than they used to.

I'll have one last chat with them about fixed vs variable before renewing in October, but the conversations I've had with them over the last few months were that 3 year fixed (whether I went through them or a totally different lender) was what they'd recommend.

I consider myself very good when it comes to numbers. But I have to admit, I've always wondered why mortgage renewal decisions felt so confusing and difficult to understand.

[GGG]

I think from a sales standpoint talking to people who just got burned by variable or people who just made out like bandits choosing fixed it makes sense that that group would be more responsive to fixed.

To your last point I think the reason is that experts don’t know what will happen and sentiment drives so much of everything so there is no way to pick the “right” answer. There is no piece of evidence to look at. Everything is priced in. So the choice is just a risk decision but your math is trying to optimize dollars.

[chemgear]

Originally Posted by DoubleF

I'll have one last chat with them about fixed vs variable before renewing in October, but the conversations I've had with them over the last few months were that 3 year fixed (whether I went through them or a totally different lender) was what they'd recommend.

I think the 3 year fixed is low enough versus the premium that you'd have to pay on a variable rate is worth it. Nevermind the relatively shorter time frame for you to come up for renewal when rates should be lower along with the comfort of knowing it's locked in. For example you might be able to get a 4.5% fixed now but the variable now would be 5%+. Can it drop enough and fast enough to offset the difference with the NPV near term.

Mind you, all of this doesn't matter. We all know everybody on CP is making six figures and has their homes paid off already!

[Sylvanfan]

Originally Posted by chemgear

Mind you, all of this doesn't matter. We all know everybody on CP is making six figures and has their homes paid off already!

6 figure income is barely enough to get into affordable housing these days. The drivers on this offtopic board likely make 250 plus and don't have any kids.

A lot of estimates that I've seen had fixed mortgages bottoming out around the start of next year with the first quarter all being pretty much the same. As Opendoor notes, those are based on longer term and have these rate cuts largely priced in. I'd look to convert the variable I have on the rental house to a fixed around that time. But I'll be tapped out by next spring and forced to sell. So I hope the local real estate market here holds till than. It's started to crater outside of where I live...but our prices are still low.

[bizaro86]

Originally Posted by Sylvanfan

6 figure income is barely enough to get into affordable housing these days. The drivers on this offtopic board likely make 250 plus and don't have any kids.

A lot of estimates that I've seen had fixed mortgages bottoming out around the start of next year with the first quarter all being pretty much the same. As Opendoor notes, those are based on longer term and have these rate cuts largely priced in. I'd look to convert the variable I have on the rental house to a fixed around that time. But I'll be tapped out by next spring and forced to sell. So I hope the local real estate market here holds till than. It's started to crater outside of where I live...but our prices are still low.

Yeah. Average household income in Calgary is $131k. Median is only $100k though.

[Sylvanfan]

Originally Posted by bizaro86

Yeah. Average household income in Calgary is $131k. Median is only $100k though.

I'd be interested to know what it is for people in the 30 to 60 year old range who would be your larger borrower.

My wife primarily works with other women. Many of them opt to work a 40% Full time job or less. They have useful husbands/partners who make real money. Although That does create opportunity to reallocate income to other households to top up their incomes. So it would help median incomes while keeping average incomes the same type of thing.

[The Fonz]

Originally Posted by The Fonz

August YOY CPI came in at 2.0%, after a 2.5% July, a 2.7% June, and a 2.9% May.

September came in at 1.6%. Odds are we see a 50bps cut next week.