My current mortgage rate of interest is Prime minus 1.4. BoC rate as of today is 4.75. My bank’s prime is 7.1 so my variable rate of interest is 5.7 as of today. Renewal is in the 1st quarter of 2027. My bank is giving me 5.3 fixed for a 3yr term. Should I switch to fixed? If I switch I will be giving up my discounted rate.
Should I switch to fixed?
- Thread starter dpierre
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promot9playnft
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janmarietn
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masterbaster
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@janmarietn Agreed. The rate can't go much higher. I mean it CAN go as high as it wants, but the world's economies can't handle any more, which is why its plateaued. The US govt BARELY approved an increase to the debt ceiling, because the high interest rates were forcing the country into bankruptcy. They likely won't approve another increase! And they won't let the country default.
If you can afford the higher rate currently and more If needed and you didn't lock on before, now is not the time to do so. It's not likely going to drop much in thr next year or Two but maybe by the time you're up for renewal it will go down a point or two.
If you can afford the higher rate currently and more If needed and you didn't lock on before, now is not the time to do so. It's not likely going to drop much in thr next year or Two but maybe by the time you're up for renewal it will go down a point or two.
@masterbaster if you do the math on the spread between where you are now, and what the offered fixed is, you might be surprised. Figure out how much lower it needs to get to break even, and then how much lower to end up ahead (MoM) then figure out how many months it takes to recover while the current payment is higher than the fixed offer would be.
Factor in its going at least 0.25 higher. Assume it doesn't come down for another 6 months, it starts to add up. It's not a friendly spread.
And people used to say the economy couldn't handle 4% mortgage rates (not even BoC rate), so idk, its hard to say that they cant go up much more. It could well go up another 50 bps, or even if it sits at 5% overnight rate, it could be there for many months.
You also are completely misunderstanding the whole debt ceiling thing if you think thats related to the central bank rates. It most certainly was not and had nothing to do with that.
Factor in its going at least 0.25 higher. Assume it doesn't come down for another 6 months, it starts to add up. It's not a friendly spread.
And people used to say the economy couldn't handle 4% mortgage rates (not even BoC rate), so idk, its hard to say that they cant go up much more. It could well go up another 50 bps, or even if it sits at 5% overnight rate, it could be there for many months.
You also are completely misunderstanding the whole debt ceiling thing if you think thats related to the central bank rates. It most certainly was not and had nothing to do with that.
mormondave
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@keeley120 I looked into going fixed and I chose to stay variable. Largely because we might want to sell in the next 5 years and if rates start to drop we'll be on the hook for the Interest Rate Differential which can be incredibly expensive.
Additionally, even if they allowed porting of the mortgage to a new property (depended on the bank I spoke to), I was told that if we bought a place over 1 million (many many places in Toronto) we definitely couldn't port it over because our current place was under 1 million and mortgages for properties over 1 million can't be insured (despite our current mortgage not having mortgage insurance since we put more than 20% down).
Additionally, even if they allowed porting of the mortgage to a new property (depended on the bank I spoke to), I was told that if we bought a place over 1 million (many many places in Toronto) we definitely couldn't port it over because our current place was under 1 million and mortgages for properties over 1 million can't be insured (despite our current mortgage not having mortgage insurance since we put more than 20% down).
masterbaster
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@keeley120 Fed and BoC rates are symbiotic to other world bank rates. Those rates factor into the rates we all pay for loans, including the money our governments borrow from other nations. The US borrows a MOUNTAIN from countries all over, with China often being the big one. So the debt ceiling is absolutely impacted by Fed and BoC, directly and indirectly.
janmarietn
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@keeley120 you know they can and will do more than .25 per cut when they have to start rapidly cutting next year right? Anyone signing on 5 year fixed now is about as stupid you can get, like need a full time care aid stupid.
resjudicata
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@resjudicata Shit...you should switch to 2-3yr fixed and probably still come out ahead.
resjudicata
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@resjudicata $310k mortgage at 6.7%/25yr amortization for 3yrs...monthly payment $2114 with total interest $60k and principal $16k.
Fixed 5.3% comes out $1856/month and total interest $47k and $19.5k principal. $260/month x 36 = $9360. $13k difference already.
You will need very steep rate cut to make up the interest cost. Cut 1.4% and you are only on par. Need like 3% cut to catch up. Cut from 5% to 2%!!! We must have bad deflation in order for BOC to cut this deep and not having to worry about inflation coming back.
Fixed 5.3% comes out $1856/month and total interest $47k and $19.5k principal. $260/month x 36 = $9360. $13k difference already.
You will need very steep rate cut to make up the interest cost. Cut 1.4% and you are only on par. Need like 3% cut to catch up. Cut from 5% to 2%!!! We must have bad deflation in order for BOC to cut this deep and not having to worry about inflation coming back.
resjudicata
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@resjudicata Yeah, extra payment can do the job too. It sucks but it is what it is.
resjudicata
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@dpierre How comfortable are you with a 5.95% if the rate increases next decision? Since your current term expires only in 2027, I'd ride it out as I think the odds of having an overall average below 5.3% are higher than 50% because of your great discount. It's just my opinion and I've been wrong before, and I don't have that famous crystal ball 
@resjudicata What if the rate was 4.81% fixed for 5yr? My current variable is 5.80, and I have until Oct 2025 with it. But I have a pre approval for 4.81% fixed, good until august this year then the pre approval expires