Rates have been falling steadily for 2 months, with some large decreases having taken place in the last 2 weeks. Given this, it is a good time to review the following data:
The Prime Rate has averaged 5.32% over the last 10 years. With the current Variable Rate Mortgage pricing sitting at or about Prime plus 0.80% most clients will average a rate of 6.15% if they stick with a VRM long-term. The current VRM rate is 3.80% and is expected to decrease a little more in the next 2 months.
The current 5-year fixed rate mortgage rate is approximately 4.35%, depending on the lender. Some conditions apply and the rate might get lower, however this is close to the low that I have seen in the last 10 years, which is 4.20%. There is room, given the banks’ costs, to lower the fixed rate, and it might even hit 4.00%. That is only a prediction but I wouldn’t be surprised if it happened.
With the above in mind many people will still opt for a variable rate mortgage with the view of locking it into a fixed rate mortgage in the next 6 months. This is a great strategy but one with a downside: That the fixed rates rise before they lock-in. I am currently purchasing a property from a family member and am opting for a 5-year fixed rate. At 4.35% I feel the rate is great and that I will average better than the VRM will. Lastly, I don’t have to worry about locking-in sometime in the future. It’s a “no-brainer”.
Please don’t hesitate to contact me if you have any questions on the above. Sandra Lastovic, The Mortgage Mentor
