Is the four-year fixed the new five-year fixed?

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Is the four-year fixed the new five-year fixed? Brokers now seeing an overwhelming preference for those shorter terms aren’t prepared to go quite that far. But they are calling it an unprecedented blip in the well-established buying habits of clients, who are now willing to sacrifice an extra year’s security in order to access significantly better rates.

“Outside of the last three months, demand for fixed has always been 90 per cent for five years,” said veteran broker Joe Walsh, with The Mortgage Centre - Mortgage Professionals Inc. in Toronto. “That changed dramatically when we saw the lenders really start to push the four-year money with rates between 2.00 per cent and 3.09 per cent.  They’ve gone up a bit since then, but the gap between five-year rates is still enough to keep clients going for four year.”

Walsh is now pegging that preference at as much as 70 per cent of his A deals.

Other brokers across Canada are making note of the sea-change, as lenders push variable rates into prime-plus territory, decimating client appetite for variable rate product.

At the same time, the vagaries of the bond market are likely driving lenders to push four-year terms, now being offered 30 basis points lower than the once-standard five-year fixed.

“Those factors mean that clients are comparing the rates and considering the loss of discounts on variables and deciding that they will go with a four,” said Walsh. “They’re seeing four years as pretty close to five. That one year isn’t seen as a big deal.”

Still, with growing economic uncertainty, both globally and in Canada, most seasoned brokers are encouraging clients to commit to making payments based on the higher five-year fixed rates even if they opt for the four.

The newfound willingness of Canadians to choose a shorter term, suggests they may take that flexibility one step further and go for a three-year term if, in fact, the rate gap widens, said Walsh. But once that stimulus is removed, borrowers will likely head back to their regular stomping grounds.

“I don’t think the four is the new five,” Walsh told “It’s just a blip.”
the removal of that stimulus

  • Len Lane on 2011-11-18 1:27:29 AM

    My only concern for the client is if the rates are substantially higher, 5 or 6 %, at the end of 4 years then any gains will be lost by not going one year further on a 5 year.

  • @kiltedbroker on 2011-11-18 4:53:59 AM

    I have presented the 4 yr option to several clients recently and they have opted to go that route. As long as you outline the advantages and disadvantages you can empower them to make a decision that suits their needs.

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