Converting your fixed to variable is not really a strategy I suggest for most people. By converting to a fixed rate, you're also taking a gamble that prime rate will continue to increase further since your new rate and payment would still be much lower than it would be if you just accepted the increase on your variable.
But will it continue to increase? There is speculation that it will, and possibly as soon as this Wednesday, January 17th. Maybe this will happen or maybe it won't. Or maybe it will increase again and then drop again next year. Anything can happen, and these fluctuations are all part of having a variable rate.
Many with variable rates will ask if it's a good time to lock in at the first word of a potential rate increase. When taking a variable rate, it's understood that you have a floating rate, and this rate can change in either direction over your 5 year term. Many have become complacent over the past several years considering we have not had an increase to prime rate since September 2010 (until mid-2017 that is). For this reason, many have become comfortable with thinner spreads thinking that the rates will not be increasing any time soon.
The truth is, if you don't like being exposed to market fluctuations, or if the thought of your rate or payment increasing, then variable rate was likely not the best product choice for you. If you are in a variable rate mortgage now, then i would stay in it and ride it out for the term. However, if you are having a tremendous amount of anxiety to the point where you are fraught with worry and having trouble sleeping at night, then you'll want to do what will set your mind at ease. In some cases, if you want to switch to a fixed, it may even make more sense to pay the 3 months interest penalty and do a switch to another lender as the rate that would be offered to you may very well be low enough to offset the penalty.
It really depends on just how much of a spread you have on your variable. If you have a thin spread between what you are paying now and what your lender is offering you. It's a bit of a different situation when you have a thinner spread and locking into a fixed might not be a bad idea in that case. You would still be betting on more increases to prime by doing so however, so it really depends on the person. Anyone taking a variable with a very thin spread could potentially consider this, but in these cases, fixed rates would have likely been the better choice for them to begin with. As mentioned, when taking a variable rate, you're accepting market fluctuations. Your expecting your rate and payment to be 'variable'. No one knows for sure what is going to happen. Like i said, maybe the rate will increase or maybe it won't. Maybe it will drop next year. We don't know. If you are worried about it, I don't see any harm in you asking your lender which rate they can lock you in for and if it will change after the announcement expected at 10am this Wednesday. It really shouldn't change once you know the outcome.
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