FIXED OR VARIABLE?
The debate over fixed vs variable never seems to end. For the past 5 years, the Federal govt and the BIG SIX BANKS have been doing everything in their power to force us into choosing a 5 year Fixed rate. The govt says it gives us security and protection against the anticipated interest rate hikes. BANKS jumped on this bandwagon because 5 yr fixed is the most profitable mortgage product.. and with fixed rates hovering at 3.00% for the last 3 years, it’s been an easy sell.
On the surface, it’s not bad advice. Fixed rates were supposed to go up. The spread between Fixed and Variable has been less than 1.00% over the last 3 years. My rule of thumb is that Variable rates should be 1.00% lower than 5 yr fixed in order to benefit from the possible rate fluctuations. So naturally, 5 yr fixed was a better choice.
DO YOU TRUST YOUR GOVT AND YOUR BANK? Read the rest of this entry »