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Mortgage Broker News | 21 Apr 2014, 08:18 AM Agree 0
Brokers may be touting the advantages of variable-rate mortgages but more and more Canadians believe fixed rate options are preferable in the current environment.
  • Omer Quenneville | 21 Apr 2014, 02:39 PM Agree 0
    Clearly Canadians are either misinformed or they are trusting the advice of a banker that has the banks best interest at heart. Variable mortgages have been the best bet since 1975 (MBN).
  • Daniel McKay | 22 Apr 2014, 05:31 PM Agree 0
    Variable rates have been best option looking back with 20/20 hindsight about 80% of the time historically, there is no doubt about it. However, in most cases when the variable netted out over the fixed, there are two typical conditions that existed at the time, that don't exist right now: 1. Relatively high prime lending rates, meaning that if any movement in prime lending rates are likely to be downward vs. upward. Well, Prime lending rates are pretty much as low as they possibly could be, and will almost certainly stay flat, before increasing once inflation gets back closer to the 3% mark. The only reason that prime lending rates have stayed so low so long is that the global economy has been sluggish in it's recovery. It's not at all the case that prime lending rates won't rise in the next 5 years, it's just a question of when. 2. significant discounts on the "variable to prime" and over the corresponding fixed rate for the same term. Right now, it's about -0.55% for both on the 5yr. Given the fact that rising Prime rates are almost certain in the next 5yrs, I would like to see those spreads at closer to, or even above -0.8% mark before I will start touting variable rates over fixed again. 2009-2011 Both conditions were a lot more favorable for variable rates than they are now, and I recommended clients to go that route. Right now that is just not the case and given rate conditions -0.55% to -0.65% is just too thin a margin to recommend variable over fixed in my opinion. I firmly believe that the next 5yrs will fall into the 20% minority where fixed outperforms variable.
  • OkanaganBroker | 24 Apr 2014, 11:48 AM Agree 0
    Variable rates historically do provide savings compared to fixed rates, but Canadians ARE NOT misinformed like Omer says. 99% of my clients still want & require the security of a fixed rate even when presented with the savings of a variable rate...Its an informed decision that suits most Canadians lifestyle & income situation perfectly.
  • OkanaganBroker | 24 Apr 2014, 11:48 AM Agree 0
    Variable rates historically do provide savings compared to fixed rates, but Canadians ARE NOT misinformed like Omer says. 99% of my clients still want & require the security of a fixed rate even when presented with the savings of a variable rate...Its an informed decision that suits most Canadians lifestyle & income situation perfectly.
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