The Bank of Canada will announce a lowering of it's overnight lender rate today, which will have a positive impact on Variable Rate Mortgages (VRMs) if financial institutions lower their own prime rate.
The pricing on VRMs however has not made them as attractive as some fixed-rate mortgages. Until September 2008 most VRMs were priced at the prime rate minus a percentage. So a typical rate of a VRM would be prime minus 0.6%. Now most VRMs are priced at prime plus 1%.
If you haven't considered a convertible mortgage for 2009, you may want to do so. The way a convertible mortgage works is that the lender guarantee a low rate for six months or a year (so you're entering into a one-year fixed rate term) and then you have an opportunity to review the economic and your own personal financial situation in a year and decide to go from there. I think it's worthwhile strategy to consider if you're into variable rate mortgages. That's because we will likely start to see the pricing change on VRMs in a year and you may see the VRM at prime (which is better than prime plus 1%).
Don't hesitate to contact me if you have any further thoughts. Sandra
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