The fact is there’re more questions being created by daily twists and turns in all areas of our lives than there are answers. What we each do is we try to make the best decision we can with the information at hand at that moment in time. And if we left it at that we’d be fine. However, the human brain cannot help but persecute our decisions of yesterday as new information arrives today.
If you’re in a variable rate mortgage… congrats, you’ve done well thus far along.
Although your brain may now be focusing purely on the rate you could have had, set against the rate it looks like you’re going to wind up with over the coming months. Keep in mind, rate was only ever part of the decision. That was the ‘small bet ‘, not the big one.
The critical factor in deciding whether to opt into a fixed rate mortgage is understanding that 2/3 people break their mortgage early, and when they do they trigger a penalty that is on average 900% higher than the penalty to break a variable rate mortgage. There’s more to a mortgage than rate. Don’t ask your lender what to do, their answer will be tilted in the shareholders favour, not yours.
Call or Email your Broker at: https://schedule.nylas.com/lisa-30min
Discuss prepayment penalty risk. Ask if you’re able to lock into a shorter-term fixed rate, perhaps a 2, 3, or even 4 yr as this will give you greater flexibility along with comfort… perhaps.
I will stay in my variable rate mortgage.
Talk to your Broker, their focus is on you – not on shareholder returns for the lender.
‘Should I lock my variable rate mortgage to a fixed?’ the answer is no… probably. Results will vary though, so speak to an expert. No not your lender, your lender wants you to lock in. In fact, the person who calls you from a lender to ‘check in with you about locking in’ is often paid a tidy little bonus for every convert they get moving out of variable – why do you think this is? Because you locking in you mortgage is a guaranteed lock in for the lender of (much) higher profits for the lender. And if you think about it, you’ll still have a pending renewal date to lay in bed awake worrying about. Although why are you worrying at all?
The bigger question today is will higher rates fix inflation?
I think not, because of the root causes of inflation today. No, I’d say higher rates have a strong chance of hammering the brakes hard on the one area of our economy that has been creating unlimited employment opportunities – housing.
Combine this with the opposing force of political pressure to create new housing. Which means stimulating the construction industry… not paralyzing it.
If steadily increasing rates stagnate home building and by extension home sales, then we may begin to hear the R word. Recession. And what does a central banker do when an economy slides into recession? They lower interest rates to stimulate said economy.
Going much higher with interest rates runs the risk of treating the ailment of inflation (caused by never-before-seen supply chain issues) with the same old medicine used to fight regular inflation – but this is not normal inflation at all, and it seems unlikely to this layman that responding with the standard medicine of simply jacking up interest rates will not work.
In other words, what goes up (Prime)… could well come back down.
Yes, in a way I’m still clinging to part of my pre-war predictions from the start of this year. And so, for now, I’ll stay variable.
As much as I believe there’s ‘no way I’m selling my home’… well let’s just say that I’ve been around the block(s) enough times to know that I don’t know what I’m talking about when I say ‘I’m not moving’ – and frankly, neither do you.
The fact is that 2/3 of us will not be in the same mortgage product an average of 33 months from now.
Life is variable, so my mortgage will be too.
Seriously consider staying variable or going variable if taking a new mortgage.
Have real conversations with your broker about penalties, that’s the bigger bet… and the odds are not in your favour.
Excerpt, Dustan Woodhouse; Where’s it all headed? http://dustanwoodhouse.ca/category/mortgage-financing