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3rd - 4th Quarter 2011. Mortgage: Variable or Fixed

  • Last Updated:
  • Oct 3rd, 2011 6:23 pm

Poll: 3rd - 4th Quarter 2011. Mortgage: Variable or Fixed

  • Total votes: 0. You have voted on this poll.
[OP]
Member
Sep 18, 2010
225 posts
5 upvotes

3rd - 4th Quarter 2011. Mortgage: Variable or Fixed

Hello all,

Which one is better way to go for the next 5 years? (according Canada's economic situation and other factors)
22 replies
Banned
User avatar
Feb 15, 2008
26318 posts
3217 upvotes
Calgary
I voted 5-year variable. Why?

a) Canada's housing market is likely to collapse;
b) BoC rates are likely to remain relatively low, if not drop going forward, in an attempt to correct the deflation caused by a), and to deal with a large influx of foreign capital due to Canada being an excellent place to invest.
c) Banks will be looking to grow profits through spread widening, which means that discounts to Prime will be increasingly scarce on mortgages.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Fanatic
Mar 15, 2005
5422 posts
960 upvotes
I am personally voting for a 5 year fixed on the mortgage I am taking for my first house this month.

A lot of people are going for variable based on speculative things like the housing market collapsing (as illustrated above).

I look at a chart like this:

http://www.canequity.com/mortgage_rate_history.stm

And see that my guaranteed rate of 3.6% for 5 years is below the average variable of the past decade.

Could rates continue to drop? Yes they could. They could also go up as well.

I prefer the cost certainty at a very fair rate in terms of mortgages anyway.
Newbie
Jun 8, 2011
97 posts
8 upvotes
K-W
Ziggy007 wrote: I am personally voting for a 5 year fixed on the mortgage I am taking for my first house this month.

A lot of people are going for variable based on speculative things like the housing market collapsing (as illustrated above).

I look at a chart like this:

http://www.canequity.com/mortgage_rate_history.stm

And see that my guaranteed rate of 3.6% for 5 years is below the average variable of the past decade.

Could rates continue to drop? Yes they could. They could also go up as well.

I prefer the cost certainty at a very fair rate in terms of mortgages anyway.


^Well said; we're in the same position for our October closing; I firmly believe rates will go up; the double dip the US is seeing will like their first dip have little impact on our housing market, Bank of Canada has been signalling for rate increases for a bit now.
Deal Addict
User avatar
Dec 18, 2004
3236 posts
169 upvotes
Mississauga
I voted 5 yr variable which is what I'll be looking for as I finalize our mortgage for our closing in less than a month.

Why? Historically, variable has beaten fixed ... irrespective of what the guys @ Canequity have posted. And I stress tested our payments. Even if prime jumps 300 bps, my family will be able to handle the additional monthly payment.
Sr. Member
Feb 1, 2010
872 posts
173 upvotes
Funny that they're analysing with a prime + rate when they're offering prime - .8
Newbie
May 3, 2003
74 posts
8 upvotes
Ziggy007 wrote: I am personally voting for a 5 year fixed on the mortgage I am taking for my first house this month.

A lot of people are going for variable based on speculative things like the housing market collapsing (as illustrated above).

I look at a chart like this:

http://www.canequity.com/mortgage_rate_history.stm

And see that my guaranteed rate of 3.6% for 5 years is below the average variable of the past decade.

Could rates continue to drop? Yes they could. They could also go up as well.

I prefer the cost certainty at a very fair rate in terms of mortgages anyway.

Personally, I would go with 5 year variable because of rates such as Prime minus 0.9 being offered these days, making the current effective rate as 3 - 0.9 = 2.1%...
and for it to match the 5 year fixed being offered i.e. 3.6%, prime will have to go up to 4.5%. I do see prime going up to 4.5.. but not in the near future.. it might be a few years before it gets there.
Deal Addict
Jun 28, 2002
1177 posts
9 upvotes
P-.95 vs. 2.82% for 3 years fixed is a tough one
Sr. Member
Aug 4, 2010
617 posts
89 upvotes
DISH wrote: P-.95 vs. 2.82% for 3 years fixed is a tough one
What are the conditions with these rates? Prepayment options, etc? Is it true when the rates are this low, flexibility in prepayment options are limited?
Deal Guru
Dec 31, 2005
13306 posts
735 upvotes
Do both...

We wanted the security of a 3 (2.99) or 5 (3.6) fixed and the benefit of p-0.85 5 year variable. So we created a mix.

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