Tag Archives: variable

Too soon to bet against a variable-rate mortgage?

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When it comes time to renew your mortgage the question always comes up: How much money are you leaving on the table if you opt for fixed rate over variable?

Academic studies indicate that the best predictor of future interest rates is the current yield curve. Based on that, interest rates are going to be pretty low for the foreseeable future. Add in some shallow discounting off prime for variable-rate mortgages and it’s easy to see why almost everyone is opting for fixed-rate mortgages these days. Even a new player on the mortgage scene has decided that a five-year fixed-rate mortgage is the only option to consider offering to clients.

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Variable-rate still the cheaper mortgage option

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The smart money’s long infatuation with the variable-rate mortgage has ended, perhaps a little hastily.

A lot of homeowners have saved a ton of money with variable-rate mortgages, where your borrowing cost floats with your lender’s prime lending rate. The prime rate is in turn guided by the Bank of Canada’s overnight rate, which was pounded lower in the financial crisis of 2007-09 and hasn’t rebounded. And yet, for reasons that may not be entirely sound, the popularity of the variable-rate mortgage is in decline.

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