Should I Take A Fixed Rate Mortgage?

In our last article we discussed that we did not believe mortgage interest rates had any kind of upward pressure in 2019. This factor should be considered when our clients ask themselves: should I take a fixed rate mortgage? But there is more to the story. Today, we will review what types of rates our clients are choosing in this spring market and why. (I know, it’s early May and there is still no sign of spring!)

How Are Mortgage Rates Determined?

Generally speaking, current mortgage rates are determined by the economy or the inflation rate. Well, Canada‘s economy has been sluggish and thus the overall prices have been controlled.

So How Do I Decide Should I Take A Fixed Rate Mortgage Or A Variable?

Short term mortgage rates and long term mortgage rates are really close to each other at this time. What does this mean? Well, for a variable rate lovers (of which I am one) the spread or difference between the adjustable rate mortgage and the five year fixed mortgage is about 0.2% or 1/5 of a point. As a comparison, last year in late 2018 the spread was .7%.

Fixed Rate and Variable Rate Mortgages Are Very Close

What does this mean for the average mortgage client? They can lock into a five year fixed rate at 3.14% and put their head comfortably on a pillow. Why take the variable rate when it is virtually the same? In today’s environment, mortgagors can take a fixed rate with very little risk.

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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