5-year 2.89% fixed rate or 2.60% (prime - 1.1%) variable?

[panchopeligro]

Please help. I'm really confused on what to do. My mortgage needs to be renewed this week and I am being offered a 2.89 fixed or 2.60 variable. I had thought variable would be the way to go, until the last few months when prime rate increased and looks like it will continue to rise.

You think 2.89 fixed will beat out a variable rate over the next five years?

What should I pick?

 

[tyler6547]

@panchopeligro Where are you getting those rates?

 

[panchopeligro]

@tyler6547 First National. They are my current lender. They said they secured the rate for me back in Feb. I just haven't pulled the trigger on it yet.

 

[tyler6547]

@panchopeligro Nice. That's a great rate! Good luck with it all

 

[kindnessc]

@panchopeligro Seriously how tf are you being offered a 5-year fixed at 2.89!?

 

[panchopeligro]

@kindnessc I am being offered it by the same lender I am currently with. They secured that rate a few months ago and are going to honor it. I think it is probably an incentive to stay with them.

 

[resjudicata]

@panchopeligro Nice congrats

 

[resjudicata]

@panchopeligro Did you hit post in 2020, and reddit just processed your request today?

 

[bearingfruitfortis]

@panchopeligro 5 year fixed don’t even think about it. That looks like a prelocked rate that same rate today is around 4%

Next month is pretty much guaranteed another 50bps hike which would put your variable above the fixed you have locked

 

[panchopeligro]

@bearingfruitfortis Thank you. I'll take your advice on this. Seems like this is the general sentiment of all the comments. That, and I am apparently a troll. Just wanted some help so I asked the question.

You don't think there is a chance prime rate will drop back down enough over 5 years to make variable win? Still, variable feels like a bigger gamble to me now vs 6 months ago.

 

[bearingfruitfortis]

@panchopeligro is possible if we go in deep recession and the central bank needs to stimulate the economy again but i think is highly doubtful.

For reference the overnight rate is 1.5% (prime 3.7% and is 2.2% higher than the overnight). The consensus among economics and what the bank flat out said is that they will raise the overnight over the long term to neutral rates (2-3%) with most economics agreeing at the bare minimum this is 2.5%. This means that prime on low end is expected to go up 1% over the next 12 months.

But then again who knows!

 

[panchopeligro]

@bearingfruitfortis Thanks for this. I guess we will have to wait and see if it plays out how they say.

 

[suckhoevang92]

@panchopeligro Where are you getting 2.89% fixed today??

 

[panchopeligro]

@suckhoevang92 Current lender is offering it to me if I renew with them. Said they secured the rate back in February. Lender is First National.

 

[suckhoevang92]

@panchopeligro Take the 2.89.

Not worth the gamble since variable is already on par with that rate basically

 

[resjudicata]

@panchopeligro Rate looks wrong

 

[panchopeligro]

@resjudicata I thought so too, but that is what my agent emailed me in two separate emails. Hopefully it is not a mistake.

 

[resjudicata]

@panchopeligro Good luck

 

[stuck]

@panchopeligro Hi op, do you mind to hook me up with your lender?

 

[panchopeligro]

@stuck Lender is First National. I got lucky, it was a prelocked rate they secured for me in February. I think their current rates are on par with what you are seeing everywhere else.