I had a discussion with The Toronto Star’s Susan Pigg about Fixed and Variable rates. Click here to read my comments in this article.
In short, BMO Captial Markets says it’s time to lock into a Fixed rate…. Well maybe, but I would caution anyone that had a BMO variable rate mortgage to think twice about locking into BMO’s well publicized 2.99% 5 year NO FRILLS mortgage. This product has limitations and restrictions that make it impossible to get out of the mortgage without selling your home. There are better options out there… you can get a great rate without sacrificing your options and privileges.
You also have to factor in the infamous BIG SIX BANK penalty calculation. We’ve written about this before. This could cost you dearly should you wish to refinance or have to pay the mortgage out before maturity. We have seen numerous cases of Bank prepayment penalties adding up to 12, 14, 18 and 20 months worth on interest. That’s right, 20 months worth of interest. Don’t get held hostage by your mortgage provider.
If you have a Variable Rate mortgage that is price at Prime less 0.50% or lower, I would stick with it… If you are higher than this or if you mortgage is coming up for renewal, then you should consider a Fixed Rate mortgage… And the only reason to consider Fixed rates is because they are priced so close to what a Variable rate could be had for today… Best Variable is around Prime less 0.25%… that’s 2.75%. Best 5 yr Fixed with ALL FRILLS is around 3.19%…
But before you make any decision, please speak with an unbiased advisor, like a mortgage broker…. Find out which product is right for you… Everyone is different and we all have different needs. There are so many unadvertised specials these days…. Your Mortgage Broker can access these products and also help explain the differences in penalty calculations and why this should be looked at more closely, even it you don’t think penalties apply to you…
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.