1.2% variable now 5.2%

[nariko]

Hello,

Looking for some advice here. I bought a condo in downtown Toronto in January 2022 with 1.2% variable open payment, now the rate is 5.2%. Spoke to my mortgage broker yesterday and below are the 3 options I have.

Option 1 (5 yr. fixed @ 4.84%) - $500 penalty to break mortgage (broker will cover the balance)

Option 2 (3 yr. fixed @ 4.99%) - $3500 penalty to break mortgage (broker will cover the balance)

Option 3 – Ride the variable wave and hope rates plateau by Q2 2023/ start dropping by Q3 2023

Broker is suggesting I wait a few months and see what happens as he can hold these rates for me for 120 days (4 months). Only downside to this is if rates continue to go up in 2023 (which they likely will) the penalty to break mortgage will increase. It’s not like I cannot afford my 5.2% payments but seeing all the extra money go towards interest is a huge waste and discouraging.

Conflicting interest rate predictions from the different big banks don’t really help either:

CIBC: Long-term interest rates in Canada and the U.S. could be at lower levels at the end of 2023

RBC: Prime rates could go ‘well above’ 7% in 2023

TD: Peak overnight rate will be 4.5% in Q1 2023 and reduced back to ‘neutral’ levels by Q4 2023 with rate reaching 2% by 2025

Scotia: Overnight rate will be reduced by 0.25% to 4% by Q4 2023 and lowered again by 1% to 3% by Q4 2024.

BMO: One last 0.25% rate hike in January which will be held through the rest of 2023

Thoughts on this? Any feedback would be greatly appreciated.

Also can someone please share the link to where I can find latest data comparing interest rate and CPI on the same graph? Thank you.

 

[matthijs]

@nariko

Conflicting interest rate predictions from the different big banks don’t really help either:

CIBC: Long-term interest rates in Canada and the U.S. could be at lower levels at the end of 2023

RBC: Prime rates could go ‘well above’ 7% in 2023

TD: Peak overnight rate will be 4.5% in Q1 2023 and reduced back to ‘neutral’ levels by Q4 2023 with rate reaching 2% by 2025

Scotia: Overnight rate will be reduced by 0.25% to 4% by Q4 2023 and lowered again by 1% to 3% by Q4 2024.

BMO: One last 0.25% rate hike in January which will be held through the rest of 2023

If you believe any of these guys can make predictions years out, go back 2 or 3 years and see what they said about 2022.

Like a fantasy novel.

 

[dhrandle]

@matthijs just like a paperback novel, the kind the drugstore sell

 

[johnsoncheryle]

@dhrandle And you won't read that book again because the ending's just too hard to take.

 

[resjudicata]

@matthijs Actually OP, look back at the advice you were given when deciding to buy the condo.

https://www.reddit.com/r/TorontoRealEstate/comments/s4cojk

Some very bad advice on that thread, given what has materialized in the last year. No one has a crystal ball, not even Tiff. Always plan for worst case scenario. Don’t take any risks you’re not equipped to handle or ride out.

The only “facts” that are relevant is what is actually going on today. That’s the best information you have. Make a decision where you’ll be OK regardless of outcome (recession, unemployment, etc.)

 

[jesusrox11]

@resjudicata This is an awesome thread less than a year ago. Damn! Never cool down, ever! And the advice from mortgage broker to buy pre-con in the burbs Lmao!

 

[resjudicata]

@jesusrox11 One of the most upvoted responses to boot!

Remember reading those types of comments a year ago and thinking about how reckless people were being. Irrational exuberance is always a warning sign. But of course, nobody could have known, LOL.

 

[matthijs]

@resjudicata "I'm a mortgage broker"

I like how they say that while giving insight to the housing market. It's like a bank teller giving you stock advice.

"Trust me bro, I'm a bank teller"