*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[Azure]

Imagine having a 30 year mortgage in the US fixed in at 1.43%. Talk about winning at life.

[DoubleF]

Originally Posted by Reaper

And mine's up December 2024 so I'm right there with you. I know I probably won't get a 1.43% fixed mortgage like I have now but I'm really hoping that interest rates chill tf out and sit tf down by then.

Hmm... Mines up in December 2024 as well. I'm seriously discussing with the spouse about getting aggressive and aiming to pay off the entire mortgage in 5-8 years. My last annual statement showed I was paying $15K in interest to the bank for that year. I'd be absolutely livid to see it go down to $10K by 2024 and then spike right back up to $20K+ after renewal. That's a #### ton of money.

Forget the opportunity cost with investing the difference, I'll take the bird in the hand, especially if some of the future outlooks are a little uncertain. I can do a lot with an extra $5-20K that isn't paid to the bank and if I do not have regular mortgage payments (Approx $30K after tax cash flows). Short term pain for long term gain. I can always HELOC up in the future if I want cheap debt.

[dubc80]

Ok, seems to be lots of good banter in here among people more knowledgeable than me.

So... here goes!

Currently on a variable mortgage at prime minus 1.26%.

My rate has climbed from 1.19% in March to 4.19% currently.
4 years left in my term.

They are offering 5.14% for 5-year fixed.

What do you experts say? Convert? Or ride it out?

Fortunately for our family, we are not one of those families who took the max mortgage available and live well within our means. Variations in payment are annoying, but not crippling.

[OutOfTheCube]

Originally Posted by Reaper

And mine's up December 2024 so I'm right there with you. I know I probably won't get a 1.43% fixed mortgage like I have now but I'm really hoping that interest rates chill tf out and sit tf down by then.

Ours is March 2025. We're at 2.9% right now (we ported our old mortgage over to keep amortization and avoid penalty at the cost of not getting one of those darling interest rates). My hope is that it's just back to around the same by then!

[Looch City]

Originally Posted by dubc80

Ok, seems to be lots of good banter in here among people more knowledgeable than me.

So... here goes!

Currently on a variable mortgage at prime minus 1.26%.

My rate has climbed from 1.19% in March to 4.19% currently.
4 years left in my term.

They are offering 5.14% for 5-year fixed.

What do you experts say? Convert? Or ride it out?

Fortunately for our family, we are not one of those families who took the max mortgage available and live well within our means. Variations in payment are annoying, but not crippling.

Basically in the same boat lol. At this point, it’s not worth going fixed if it’s not crippling. But hindsight is always 20/20.

[Azure]

Inflation fell in the US, so they may ease up on ANOTHER interest rate increase, but I have zero clue beyond that.

I'd expect Canada inflation numbers to continue dropping as well.

[DoubleF]

Originally Posted by dubc80

Ok, seems to be lots of good banter in here among people more knowledgeable than me.

So... here goes!

Currently on a variable mortgage at prime minus 1.26%.

My rate has climbed from 1.19% in March to 4.19% currently.
4 years left in my term.

They are offering 5.14% for 5-year fixed.

What do you experts say? Convert? Or ride it out?

Fortunately for our family, we are not one of those families who took the max mortgage available and live well within our means. Variations in payment are annoying, but not crippling.

Personally, I'd ride it out, but I wouldn't do completely nothing either. I'd increase the payments $100-200 or whatever you're comfortable with.

I jacked up my payments by $250 or something after selling my rental (few grand a year) and it felt pretty good to see my amortization duration knocked down 2 years.

[afc wimbledon]

My guess is inflation increases for the next few years and mortgage rates go up with it, I would assume topping out around 8% briefly, I suspect the era of low interest rates is over for quite a while

[powderjunkie]

Originally Posted by dubc80

Ok, seems to be lots of good banter in here among people more knowledgeable than me.

So... here goes!

Currently on a variable mortgage at prime minus 1.26%.

My rate has climbed from 1.19% in March to 4.19% currently.
4 years left in my term.

They are offering 5.14% for 5-year fixed.

What do you experts say? Convert? Or ride it out?

Fortunately for our family, we are not one of those families who took the max mortgage available and live well within our means. Variations in payment are annoying, but not crippling.

Check the 2/3/4 yr fixed rates - that might be a better way to hedge.

Are you pretty sure you'll stay at that house for the next 5 (or whatever years)?

When did your banks prime rate last change? Another increase seems nearly certain by the end of the month. Beyond that nobody knows.

Personally I think it'll be a bit of a wash between those two options over the next few years, but there is still way higher downside risk than upside reward at the fringes of the probability spectrum.

Ask yourself what you'll regret more - #1) a couple extra years where 5.14 is 2-3% too high...or #2) several years creeping to 7 or 8 or 9%?

Ultimately I fall back on my premise that you probably won't fully realize the 'savings' of variable for another decade or more, but you could feel the pain very soon (and also down the road).

[Kiran403]

Does anyone know if, when renewing my mortgage, I can opt out of the CMHC insurance they make you get if you put less than 10% down when making the initial purchase? We had to get it when we first bought the house but we've paid down enough of the principal now that we would be past that. House is worth approximately $540K and we owe about $405K.

[bizaro86]

Originally Posted by Kiran403

Does anyone know if, when renewing my mortgage, I can opt out of the CMHC insurance they make you get if you put less than 10% down when making the initial purchase? We had to get it when we first bought the house but we've paid down enough of the principal now that we would be past that. House is worth approximately $540K and we owe about $405K.

The threshold is 20% down for no insurance, but you don't need to pay again on renewal anyway - the insurance is good for the life of the loan including renewals.

[Cecil Terwilliger]

Originally Posted by Firebot

Expanding on the sleaziness of big banks and on the collateral subject

See if you can find information on collateral mortgages anywhere on the TD page.

They also make zero mention of it on their mortgage rate FAQ page

https://www.td.com/ca/en/personal-ba...ortgage-rates/

Doing a search, way down the list of search, you will find this link, but is it in here? It's not even in the glossary

https://www.td.com/ca/en/personal-ba...fixed_variable

Oh wait it is, under security

S
Security - In the case of mortgages, real estate offered as collateral for the loan.

Of course, it doesn't tell you what it means. You usually learn of the collateral charge when you try to shop for a new lender, and it becomes a gotcha moment.

If banks won't even tell you and hide what type of mortgage they are selling you, how would the average consumer know about obscure conditions like trigger rate that have never been triggered in in the 21st century?

Collateral used in that definition refers to the home (the security), not the type of charge.

Shopping for a new lender is not a big deal if you have a collateral charge. Most lenders can do collateral transfers now. If you even want a transfer. Many people end up refinancing instead to access more equity or whatever.

Many lenders use collateral charges and customers love it. It’s how all of the homeline plan products are registered. TD just happens to register all their mortgages as collateral.

[Kiran403]

Originally Posted by bizaro86

The threshold is 20% down for no insurance, but you don't need to pay again on renewal anyway - the insurance is good for the life of the loan including renewals.

Sure but is there a way to cancel it now? If I can lower my payment or apply the insurance portion to the actual mortgage amount, that would be best.

[Slava]

Originally Posted by Azure

Inflation fell in the US, so they may ease up on ANOTHER interest rate increase, but I have zero clue beyond that.

I'd expect Canada inflation numbers to continue dropping as well.

This view (of a pause in hiking rates right now) is pretty contrarian. I’d also point out that it depends on what you look at for the CPI print this morning. On one hand, it was down month over month. On the other it exceeded expectations on a year over year basis. The stock market isn’t everything, but futures went from ~350 up before the announcement to down about 450….only to finish the day higher by about 825 (all on the Dow). Pretty volatile, to say the least!

The initial thought with that inflation print was a hike of 0.75 in the US was all but locked in.

[Cecil Terwilliger]

Originally Posted by Kiran403

Sure but is there a way to cancel it now? If I can lower my payment or apply the insurance portion to the actual mortgage amount, that would be best.

Not really how it works. You’ve paid the premium. It’s gone. There’s no getting it back.

If you renew, the default insurance stays in place. If you do a HR transfer, it stays in place. If you refinance, it’s gone. But your mortgage balance is the same in all 3 scenarios. The rate offered to you might be different tho.

[bizaro86]

Originally Posted by Kiran403

Sure but is there a way to cancel it now? If I can lower my payment or apply the insurance portion to the actual mortgage amount, that would be best.

You don't want to cancel it. You've already spent the premium (it is exactly 0% refundable) and you'll get a better rate with insurance than without it, since the government is guaranteeing your mortgage.

[GGG]

Originally Posted by dubc80

Ok, seems to be lots of good banter in here among people more knowledgeable than me.

So... here goes!

Currently on a variable mortgage at prime minus 1.26%.

My rate has climbed from 1.19% in March to 4.19% currently.
4 years left in my term.

They are offering 5.14% for 5-year fixed.

What do you experts say? Convert? Or ride it out?

Fortunately for our family, we are not one of those families who took the max mortgage available and live well within our means. Variations in payment are annoying, but not crippling.

There are several economic papers that suggests that variable rate mortgages are lower cost in real dollars over time. So the question becomes a) do you believe you are smarter than the bond markets or can you afford the downside risk.

If you can afford the down side risk then variable is likely better because you are not smarter than the bond markets. If you would be seriously hurt by 3% more then maybe you lock in.

Normally I would take my own advice but during the pandemic I renewed on fixed to lock in a stupidly low rate for 4 years but then it’s back to variable.

We are headed into an uncertain period of time where we could have overshot interest rates already resulting them dropping in the next 2-3 years or we could be in for a long term inflation fight. The usual best option in personal finance is never try to beat the market.

[The Fisher Account]

I picked variable. I own it. But it really sucks when you keep seeing hundreds of more dollars every few months just get wiped out of your disposable income.

[you&me]

Originally Posted by The Fisher Account

I picked variable. I own it. But it really sucks when you keep seeing hundreds of more dollars every few months just get wiped out of your disposable income.

This post perfectly aligns with your avatar

[blankall]

Originally Posted by GGG

There are several economic papers that suggests that variable rate mortgages are lower cost in real dollars over time. So the question becomes a) do you believe you are smarter than the bond markets or can you afford the downside risk.

Is is true that variable is generally a better deal. However, because something generally works doesn't mean it should be applied to all situations. I don't think it's a matter of thinking your "smarter" than bond markets.

For example, in 2021, when the banks were giving fixed rates for 5 years below 2% fixed, and the government was also pumping cash into the market, which was likely to spur inflation, it wasn't arrogant to realize that looking at fixed, and for as long as possible, should be an option.

There's also a huge advantage to certainty and the ability to plan around that certainty. For example, if I know that my mortgage is going to be X amount, I have a much better idea of what my disposable income is, and I may be better able to take advantage of other investment opportunities.