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5 year Fixed rates are going up.. time to consider Variable rate.

graph trend upThe 5 yr Gov of Cda bond yields hit a 2 yr high on Friday reaching just over 2.00%.  That’s up around 0.35% since mid July and up around 0.75% since May.   The increase started in May when the U.S. Federal Bank Chair, Ben Bernanke, made some comments about possible easing of the Fed’s stimulus program beginning as early as September.

Fixed mortgage rates are closely tied to the Gov of Cda bond yield.   When the yield goes up, mortgage rates are sure to follow.  With 5 yr fixed rates expected to rise, it makes for an interesting mortgage market.  Which product and term is best to choose today?   The answer is different for everyone.   We all have different needs, goals and risk tolerances.  

Historically, short-term mortgage money has been our best bet to paying the least amount of money to own our homes.  The data is clear… Variable rate mortgages had a lower rate than Fixed rates in over 88% of the time.  But that all changed when we saw 5 yr fixed rates under 3.00% earlier this year.  And at the same time, Variable rate pricing was higher with rates of Prime less 0.30% (3.00% – 0.30% = 2.70%) compared with the norm of Prime less 0.75%.   Choosing a 5 yr fixed rate for most borrowers was easy.


Today, the choice becomes a little tougher.  Do you lock into a 5 yr fixed at around 3.39% (soon to go up to 3.59%) or do you choose a Variable rate at Prime less 0.40% or 0.45%?   Do you understand how Variable rate mortgages work?  Did you know they are NOT all alike?  There’s yet one more option worth considering…  How about choosing a 1 yr fixed or 2 yr fixed under 3.00%…  Why would you do this?   If you believe that Variable rate pricing may become more attractive in the next 12 to 24 months, like some experts believe, then it may be worth going with a shorter term.

Of course, there is no ‘one size fits all’ mortgage.  And that’s where we need to spend a little more time to get informed.   A mortgage is the biggest debt that most of us will ever have.  You better know what you are getting into before signing on the dotted line.   Speak with an independent Mortgage Advisor.. Speak with an experienced Mortgage Broker.  At the end of the day, the borrower should not have any questions.  There should be no second guessing.  You should feel confident in the mortgage decision.   And that’s what a successful mortgage process should look and feel like.   If you aren’t getting that feeling, then go elsewhere.

Your best interest is my only interest.

As always, I welcome your comments, calls and questions.

Steve Garganis 416 224 0114


Steve Garganis View All

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.

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