I've never done >1 yr fixed since first mortgage nearly 2 decades ago. Always took the lowest rate available since then which has been in the form of 1-yr fixed or 5-yr variable (about 4-5x 1-yr and 2x 5-yr variables).DentDude wrote: ↑Aug 5th, 2017 9:46 amI could use some expert advice. In the past I have always traditionally gone variable and it has worked out very well. In the past two years, I have gone with successive 1 year fixed as the rate I got has been so good. Now with renewal time coming up in about 4 months, I have to decide on a term again. It seems most are not recommending the variable now due to the very low spread between the variable and the 5 year fixed now and the further imminent rate hikes in the next year. Everyone is talking about 5 year fixed rates right now but to me, 5 years seems like an awfully long time. I did a 5 year fixed just once at the very beginning and regretted it completely back then and thought, never again. What do others think about a 2 or 3 year fixed instead? Or is a 5 year fixed vs the 2 or 3 just about right for everyone at this point. Thanks for any advice.
Rates went down/up/down/up... during that time. I think even in an increasing rate environment you come out ahead unless you take a 5-yr variable with a tiny spread - but that's what the 1-yr fixed rates were for ... to say 'no' to crappy P-0.5 or 0.6% 5-yr variable discounts and wait for ones like P-0.9% or 0.95%
If you can get P-0.96% at HSBC or comparable I'd go for that. Even with 4 more hikes evenly spread out you'd be at 2.99% and have come out with a weighed average lower than the 2.49% mid-point since rates earlier in your term have more weight since the principal is higher then.
If the rates increase more steeply or more than 4 times you MIGHT lose. Or if rates stay low or go down again after increasing you will win. That's the risk/benefit of the variable. People who want certainty pay the "insurance premium" of the higher starting rate with a 5-yr fixed. Usually, "optional" type extra insurance is a waste of money and you can safely save by skipping out on it. Insurance against disaster is certainly not worth skipping out on, but the rates increasing by a percent or more I wouldn't put into the "disaster" camp. Disaster is car written off or house burns down. Buy insurance for that.