Can not decide on Mortgage! (5yr Vr P-0.8=6.40%) OR (3yr Fix 6.05%)

[ckat]

Hi Guys, which one do you think makes most sense, I really can not decide, on one side, I do not see them raising Prime much higher than what it is today! (7.2) on another I also don't see them lowering it anytime soon! but the difference is so close (5yr Vr P-0.8=6.40%) OR (3yr Fix 6.05%) can not decide which one !

I am leaning *A TAD* towards Variable, because over 3 years, I have a feeling there is higher chance BoC lower the Prime than actually increasing it ?

What would you guys do?

Mortgage amount: 650K

 

[resjudicata]

@ckat You are guessing. Everyone is guessing. Nobody knows. Before last week I bet a lot more people thought rate cuts were coming sooner rather than later but inflation seems sticky.

Pick based on your risk tolerance, not what you think is going to happen, because you don’t. Do you want a stable payment for three years? How would you feel about another 1/2/3% increase on a variable? Are you ok if that happens - can you afford it?

 

[jchu4]

@ckat I would go for 3 year

 

[hundreddays]

@ckat Interest rate forecast https://wowa.ca/interest-rate-forecast

 

[laurieanne]

@hundreddays Do they publish their past forecasts so you can see how accurate their current ones are?

 

[hundreddays]

@laurieanne I don't think so, but the data is based on long term bond yields, so its not this particular website making forecasts. Take it as a best guess given available market data, but presented in a easy to understand format.

 

[backbancher]

@ckat I’d go fixed for peace of mind.

I bet we don’t see anything going down for a year or more. So might as well stick to the 3 yr

 

[megnic7]

@ckat You can probably find a rate lower than 6% on a 3 year fixed through the broker channels.

I would only go variable if you believe that rates will fall more than 50 bps within the next 3 years.

Considering both BOC & US Fed signalled that they are still willing to raise rates over the next few months, I'm not convinced rates will fall fast.

 

[stephen39]

@ckat I'm taking an educated guess but I can see a .25 increase coming and then a .25 to .50 decrease for the whole of 2024, which will start the downward trend for 2025

 

[linda57]

@ckat Prime is going to go up again before the end of the year.

 

[greggory]

@linda57 THIS GUY TIME TRAVELS

 

[xxloveisgodxx]

@ckat Take fixed, peace of mind and safety. Rate cuts anyways take a year or two to bottom out, so at renewal, you will have a low rate.

 

[fruitfilled]

@ckat I feel like we are at or near peak rates for this cycle. I would take the variable.

 

[azza1143]

@fruitfilled Inflation is still high and oil prices are high and should be going higher. Don’t be so confident that rates won’t go up any further.

 

[aaronemill12]

@fruitfilled people have been saying this since summer 2022

 

[theologyninja]

@ckat Fixed. Prime is still spiking

 

[kaykay8]

@ckat Is 6 the norm now?

 

[resjudicata]

@ckat I don't think we are close to what we need to indefinately pause or cut rates and they will continue to go up until something crashes

 

[priya91]

@ckat Variable. The worst of the rates are already behind us. You'd go fixed to avoid, what one or two .25 increases? Variable will go down much faster esp over your 3 year time horizon.

 

[trisswines]

@ckat Get a ladder. Take 5 fixed terms (5-4-3-2-1) and then you just roll over 5 year fixed each time. You dollar cost average interest rates. Pay down the highest rate one first if you have extra.