It seems that Canadians are talking as much about real estate and interest rates today as they do about the weather, and we love to talk about the weather don’t we…lol.  With mortgage rates still at historical lows and only one way to go but up, it would seem logical to perhaps forget about getting a variable rate tied to prime and simply ‘lock in’ to a fixed rate right? Well if you will lose sleep at night over your rate/payments going up, then fix, fix, fix. However, just know that you are paying a big premium for such ‘peace of mind’. If you are a first time home buyer, adjusting to a new ‘home ownership’ budget, we recommend you take the safe  route by choosing ‘fixed’.

For those of you willing to take a little risk in order to save(perhaps a lot) statistics have proven that from 1950 to 2007 Canadians 88% of the time have saved more by having variable mortgages tied to prime versus taking the fixed rate mortgage. The spread between variable and fixed is a whopping  2.64% which represents very significant savings and there always is a ‘spread’. If the prime rate begins rising this June as expected(as will fixed rates) it would have to climb all the way to4.84% before you stop saving vs fixed rates. Experts predict prime will rise about 1.25% to around 3.5% in late 2011 when it should stabalize. We believe that by then you will be so far ahead of the game, that you then should stay with your subprime mortgage rate to the end of term. Regardless of choosing variable or fixed, we all have to deal with market realities at the end of each term don’t we.

We have received numerous calls from people thinking of renewing early and not waiting until next year when their mortgage matures. We show them that the penalty is insignificant relative to the savings they can realize by going with a subprime mortgage now. Our best is .50% below prime or 1.75%, our best 5 year fixed rate is 4.39%.

If your current mortgage is $200,000 at 5.1% your monthly payment is $1015. If you renew now, your payment would be reduced to only $637/month and if your new variable averages over 3.0% over 5 years, your average payment would be $736/month. For the very astute who plough the savings against the mortgage(called prepayments) they will pay down faster than before, saving even more in interest in the years ahead. Which do you prefer? Call us today and we’ll help you decide. Talk to you soon. would