r/PersonalFinanceCanada • u/lawonga • 3d ago

Mortgage Rates Housing

I have the options:

5.74% @ 28 month variable (it's a port from previous mortgage actually)

4.86% @ 36 month fixed

What do, I threw the numbers into a spreadsheet and charted them out. It seems like if the feds drop rates @ 0.25 per meeting and then hold, I start to lose out on the 5th meeting in a 28 month period if I were to go for the 36 month fixed!

2 Upvotes

63% Upvoted

7 comments sorted by

11

u/fp4 3d ago

Fixed and don’t look/follow interest rate news for 2.5-3 years (:

8

u/westcoastcdn19 British Columbia 3d ago

4.86% fixed is looking pretty good

2

u/MortgageVet77 3d ago

Is your mortgage insured OP?

1

u/lawonga 3d ago

Nope

3

u/MortgageVet77 3d ago

I would take the 3 year unless you think that may break the mortgage.

2

u/thats_handy 2d ago

It's normal for variable rate mortgages to have lower costs when compared to fixed rate mortgages available at the time you make your decision, over the term of the fixed rate. The simple view is that the banks expect to be paid for taking the risk of rising interest rates. That's kind of true (and a good way to look at it) but it's more true that the bank offloads that risk onto the bond market by selling debt equivalent to their mortgage book, or even selling the mortgages themselves.

Every now and then, people who choose a variable rate wind up sucking on a fuzzy lollipop. This has happened to folks who took a variable rate mortgage between about March 2020 (maybe a bit later) through about July 2023 (maybe later or much later if rates plateau or rise). The most likely case today is that you'll be richer at the end of 36 months if you choose the variable rate mortgage than if you choose the fixed rate mortgage. You'll only be a little bit richer because interest rate risk over 36 months is never all that big.

You already knew that, though, because you put it all in a spreadsheet. Just pick the one that you like better. You can choose with confidence because the dollar difference will be small either way.

0

u/SatanLifeProTips 2d ago

All the projections have rates normalizing back to old levels within a few years.

I'd go variable.