Personal Finance

0.5% below prime open variable rate mortage good or bad right now?

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  • Nov 5th, 2005 12:08 am
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Sr. Member
May 28, 2005
719 posts
1 upvote
Toronto

0.5% below prime open variable rate mortage good or bad right now?

If I can get a rate such as the above from CIBC, would that be a half decent rate or can I find something a lot lower if I want to stay both variable rate as well as open?

Thanks in advance for the boring question :)
16 replies
Deal Addict
Jul 20, 2005
1293 posts
63 upvotes
There have been a few threads about this lately.
BMO has (or had until recently) a special of prime -.85 for variable open which is the best you can get as far as I know.
RBC will match this (they did for me). CIBC will probably do so too.

Last year CIBC offered me -.75% for open var, so -.5% is not a good deal.
Sr. Member
May 28, 2005
719 posts
1 upvote
Toronto
Hmmm I'll talk to CIBC and see if they can match it. Thanks for the heads up :)
Deal Addict
Feb 22, 2005
2431 posts
8 upvotes
The rates are going up.....fact not speculation. Dec 6 and Jan 24 are the next Bank of Canada dates for this.

If you have a larger mortgage, lock in while you can and save the variable for when rates are substancially higher.
Deal Addict
Mar 22, 2005
2008 posts
10 upvotes
As far as I know, when you lock you're not locking in at the variable rate. You're locking in at the closed mortgage rate that's quite a bit higher.

Can someone confirm?
Deal Addict
Jan 21, 2003
1141 posts
11 upvotes
sparkplug wrote:As far as I know, when you lock you're not locking in at the variable rate. You're locking in at the closed mortgage rate that's quite a bit higher.

Can someone confirm?
That's correct. It's why everyone on a variable mortgage is sweating buckets now at the prospect of a 1.5% increase in prime over the next year.
Deal Expert
User avatar
Oct 16, 2001
76501 posts
1583 upvotes
scottyb wrote:That's correct. It's why everyone on a variable mortgage is sweating buckets now at the prospect of a 1.5% increase in prime over the next year.

Even if it does go up 1.5% over the next year, Ill still be at a better rate than antyhign I can lock in for 5 years right now
Sr. Member
May 28, 2005
719 posts
1 upvote
Toronto
most people I've talked to have said that in the long run, you end up saving on a variable rate... its just that sometimes the payments will be higher and sometimes not depending on what prime is. I can deal with that.

By the way, I was able to get 0.75% below prime for 5 years on a variable open mortgage. I hope thats better than the initial 0.5% I had :) It doesnt sound like much but I guess even 0.25% can add up over the long run.
Deal Addict
Mar 22, 2005
2008 posts
10 upvotes
Variable rates are great when the economy is sluggish or there's political instability. Right now we're running of all cylinders and interest rates are continually rising, but sometimes that can change quickly.
Deal Addict
Jul 20, 2005
1293 posts
63 upvotes
Hey contor, don't let them rip you off. It should be -.85%. Even 0.1 can add up to a few thousand over 5 years. Just print out this page and take it to your cibc branch.

http://www4.bmo.com/popup/0,4442,35649_ ... hannelId=0

P.S. Your monthly payments will not change when the rate changes. However your amortization will.
Deal Addict
Sep 19, 2005
2838 posts
48 upvotes
Spidey wrote:Even if it does go up 1.5% over the next year, Ill still be at a better rate than antyhign I can lock in for 5 years right now

Over long run,,, better off with variable rate. Staying the course
Jr. Member
Mar 14, 2004
188 posts
Spidey wrote:Even if it does go up 1.5% over the next year, Ill still be at a better rate than antyhign I can lock in for 5 years right now
If it goes up 1.5% in the next year (and assuming it doesn't drop again over the next 4 years) how does something starting at 3.90% (compounded monthly) going up to 5.40% (also compounded monthly) for the remaining 4 years beat a 5 year rate at 4.7% (compunded semi-annually) for the entire term without making a massive payment after the first year?

There are a lot of assumptions here, and you can only really know which is better after the fact. I have heard it said that over the past 50 years 90% of the time people would have been better off with a variable instead of fixed. I believe that we are now in the 10% of the time that it is better to be in the fixed.
Deal Addict
Mar 22, 2005
2008 posts
10 upvotes
Well, Bush is in power so we could head back to the 90% at any time. All it takes is for the U.S. to invade another country or oil to spike up again.
Deal Addict
Jan 21, 2003
1141 posts
11 upvotes
sparkplug wrote:Well, Bush is in power so we could head back to the 90% at any time. All it takes is for the U.S. to invade another country or oil to spike up again.
You have your argument backwards... that would further raise inflation and interest rates and cause variable rates to look worse and worse.

I agree completely with Drogg... why go variable when rates are on the way up? Even going short term fixed is better than that.
Deal Addict
Mar 22, 2005
2008 posts
10 upvotes
[quote="scottyb"]You have your argument backwards... that would further raise inflation and interest rates and cause variable rates to look worse and worse.
QUOTE]

When war started, the economy struggled and Greenspan lowered interest rates. The economy is healthy right now though, so rates are rising. If the U.S. invades North Korea or another middle east country, the economy should struggle again and drop interest rates.
Sr. Member
May 28, 2005
719 posts
1 upvote
Toronto
hi monomono, actually I dont think i'm being ripped off. See BOM was giving the -0.85% for a 3 year term and not five. I bet if I wanted to get one at 5 years they wouldn't give it for that. The CIBC one I got will be 0.75 below for 5 years so I think thats pretty good :)
Deal Expert
User avatar
Jun 14, 2003
23140 posts
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contoursvt wrote:hi monomono, actually I dont think i'm being ripped off. See BOM was giving the -0.85% for a 3 year term and not five. I bet if I wanted to get one at 5 years they wouldn't give it for that. The CIBC one I got will be 0.75 below for 5 years so I think thats pretty good :)
It is variable rate. You should not really care if it is 5 years or 3 years. What you care should be how much -% you can get. The chance is you can get another good rate 3 years later. The higher the interest rate, the higher the -% they can give it to you.

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