Personal Finance

Predictions on Prime Rate? (mortgage-related)

  • Last Updated:
  • Apr 8th, 2016 3:48 pm
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Poll: What will happen to prime rate (presently @2.7% as of OP date) in 2016?

  • Total votes: 39. You have voted on this poll.
Go up
 
6
15%
Go down
 
9
23%
Stay the same
 
24
62%
[OP]
Deal Expert
User avatar
Sep 21, 2010
15185 posts
4579 upvotes
Montréal

Predictions on Prime Rate? (mortgage-related)

Just wanted to see everyone's feel on this as still deciding whether to go w/ a variable rate mortgage renewal or the fixed rate, which is lower atm. Some ppl are saying that the fixed is good since: 1) variable rate choice is already higher; and 2) prime rate is expected to go up, in which case, I'm good.

Obviously, no one knows for sure and it's a crystal ball thing but since I'm nowhere near mkt financially-savvy as many of you guys, just wanted to see what you all think.

Atm, prime is 2.7%, will it go up or down in 2016? Poll included.
7 replies
Deal Fanatic
Dec 6, 2006
5238 posts
1511 upvotes
Toronto
Right now, most definitely do fixed. The difference between fixed and variable is way too small to worth the risk with variable. If you were looking for a mortgage a year ago or before, then variable had good discount (say, P-0.9) which made it worthwhile, but not now.
Sr. Member
User avatar
Mar 9, 2012
747 posts
338 upvotes
I can't stress people more about this... It's not about what rate is the best or what rate is the lowest between fixed rates & variable rates, it's about understanding what you are getting into and how the penalty works and what are your options if you sell your property before the end of the term.

Variable/closed mortgage always give you a 3-months interest penalty, usually provide you with the lowest penalty after any open mortgages.
Fixed mortgage are complicated calculation based on the remaining interest of your mortgage and the bank's posted rate for your remaining term.
Most banks will offer you a portable mortgage that let you move your existing mortgage to another property as long as it's equal amount or a bigger mortgage.

Regardless if you choose variable or fixed, your payments stay the same for the rest of the term, it's just a matter of how much capital will go against your mortgage on variable rates. If the prime rate goes up, you pay more toward the interest, if the prime rate goes down, you pay more toward the capital.
[OP]
Deal Expert
User avatar
Sep 21, 2010
15185 posts
4579 upvotes
Montréal
skunkyjosh wrote: I can't stress people more about this... It's not about what rate is the best or what rate is the lowest between fixed rates & variable rates, it's about understanding what you are getting into and how the penalty works and what are your options if you sell your property before the end of the term.

Variable/closed mortgage always give you a 3-months interest penalty, usually provide you with the lowest penalty after any open mortgages.
Fixed mortgage are complicated calculation based on the remaining interest of your mortgage and the bank's posted rate for your remaining term.
Most banks will offer you a portable mortgage that let you move your existing mortgage to another property as long as it's equal amount or a bigger mortgage.

Regardless if you choose variable or fixed, your payments stay the same for the rest of the term, it's just a matter of how much capital will go against your mortgage on variable rates. If the prime rate goes up, you pay more toward the interest, if the prime rate goes down, you pay more toward the capital.
Tx, luckily I'm aware of those factors. So, everything else being equal, I'm looking forward to comments/predictions on the prime rate.
Sr. Member
User avatar
Mar 9, 2012
747 posts
338 upvotes
Prime rate will stay the same. Don't worry. Banks already fighting against each others and the prime rate is not even moving.
If it moves, it's down again.
Member
User avatar
Feb 26, 2008
479 posts
47 upvotes
Stay the same most likely. I highly doubt it'll go up. All levels of government don't want the RE party to end.
Banned
Sep 19, 2012
1253 posts
1865 upvotes
Calgary
My vote is for prime staying the same in 2016. Virtual lock that rate won't move on April 13th so next 5 announcements are key: inflation (which is one of drivers of BOC rate) isn't going to change that drastically in next 7 months. Bonus prediction, no rate increases in 2017 either!
Deal Addict
Jan 27, 2015
1037 posts
462 upvotes
Edmonton, AB
No body knows for sure, but it is highly likely that the rates will stay the same OR go lower. Several European countries have negative interest rate and to think that we won't go negative would be quite naiive.

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