Will This Pain Ease Anytime Soon?

If you’re gainfully employed and in a fixed rate mortgage, especially one taken at under 2%, you may well be saying, what pain?

If you’re in a variable rate mortgage with a static payment, you may also be asking; what pain?

We are after all a nation at, or near, full employment.

We’re also a nation that packs restaurants and bars not just on Friday and Saturday nights, but all week long it seems.

We’re a nation that is running with record inflation as well, and to be fair – it’s crushing some families and individuals, but far from all.

As for those in adjustable-rate mortgages whose payments have been steadily rising all year, or those at or near our variable rate trigger rates… well it’s sure easy to abuse ourselves with hindsight.

Something we humans tend to do in all areas of life, I don’t need to list examples… the pain of hindsight thinking abounds.

The thing about being in a variable rate mortgage, which yes, I still am myself, is that it’s not something one can call the ‘wrong move’ until the full five years have passed from the date the variable path was chosen.

Six rough months do not a mistake make.

It’s easy to speculate today, in the face of Prime racing up to 5.45% as of Sept 7, 2022, that a wrong move was made yesterday, but until the full term runs out (many many tomorrows from now) – and we do the math involved (which changes radically if the mortgage is broken early) we just won’t know.

Things change quickly, how quickly you ask?

Well check out this piece of guidance from the Bank Of Canada;

18 months later we learned that 18 months was Tiff’s definition of ‘a long time’.

The bottom line: This is painful for some of us for sure.

However, locking into a fixed rate can be far more painful in the long run. 5years is a long, long time. And in many cases, you can in fact lock into a 2, 3 or 4yr. Although the instant rate increase and the potential prepayment penalty implications should always be considered.

As for me, I’ll be staying the (variable) course, because while this year may not be awesome so far, the past 26 years I’ve opted for variable have been winners. And that’s quite the trend to buck.

Is this time different?

We shall see.

Credit to Dustin Woodhouse for this article.

Will This Pain Ease Anytime Soon?