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Rates Starting to Rise….What to do???

Financial institutions across Canada are starting to raise their fixed term rates this week by as much as 0.25%.

One chartered bank’s best 5 year fixed rate is now 4.24%. However, we still have a few lenders today promoting their best 5 year fixed rate at 3.79%. The bank’s prime lending rate remains unchanged at 3.0% and many of our clients continue to reap the benefits of a closed variable rate mortgage at a rate of Prime minus 0.75% (currently 2.25%). If you are currently in a higher, fixed term rate (perhaps with 1 or 2 years remaining), you might wish to talk with your lender and question them on what the penalty is to payout your mortgage at this time. Then, you’ll need to consider your options (variable or fixed) and also your comfort level. There is no doubt some peace of mind with the guaranteed fixed rate (and payments) option while those prepared to take the risk with upcoming interest rate hikes, will consider the lower variable rate option. The difference between the best 5 year fixed rate (3.79%) and best variable rate (2.25%) is quite substantial at 1.54%. That’s over $1,500 in interest savings per $100,000 per year! As rates go up, the savings amount will decrease, but until Prime climbs a further 1.50% (reaching 4.50%), you will still benefit with a variable rate mortgage. There are pros and cons with either option but, most importantly, you should choose what’s best for you and your family. If you would like more information, please give me a call at your convenience at 250-762-2070 (Kelowna area) and for those outside the area, my toll-free line is 1-888-877-3535. Have a great day everyone! Ed