Variable or fixed rate

Talk to a mortgage broker, current outlook variable all the way

My bank suggested 5 year variable but I'm not sure if that's the way to go. Given that the rate is not going to stay low forever, in the long run it might make more sense to lock in the lower rate? I've done some googling around and that seems to be the advise people are giving.

It depends on your risk tolerance. Do you want to be worrying about interest rate movements when you are trying to sleep at night? Or would you prefer certainty?

I would probably go for fixed because I wouldn't want to worry about rate movements, but THAT IS ME! Maybe you are different.

Depends on a few factors such as your leverage. If your leveraged to the max I would go fixed for peace of mind. If you have wiggle room, I would go variable. There is still some room for interest rates to go down even lower and we pretty much got the thumbs up from the Bank of Canada that we wouldn’t see increases for 2-3 years. I signed a mortgage about a month ago and my rate dropped from the time I signed the mortgage to when the property closed.

Also, if you need to break the mortgage for any reason you’re not paying an arm and a leg with variable as opposed to fixed.

uberrider wrote: ↑ My bank suggested 5 year variable but I'm not sure if that's the way to go. Given that the rate is not going to stay low forever, in the long run it might make more sense to lock in the lower rate? I've done some googling around and that seems to be the advise people are giving.

There's a misconception that if the variable rate increases to above what the fixed could have been during your term that you somehow come out behind. That is not the case. Depending on the spread between variable and fixed at the time of commitment, the interest that you saved at the beginning of your term prior to rates increasing to the point where it's now higher than what your fixed would've been might more than offset the increased interest you're paying later.

That being said, some people might not like the cash flow impact with increasing rates even if over the entire term you're still paying less interest with a variable rate so that's something you would have to consider. One should also consider the penalties between fixed and variable interest mortgages in case you need to break your mortgage. Generally speaking, variable rate mortgages have much more favourable breakage fees.