No such thing as one-size fits all

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Recent rate cuts to both prime and fixed mortgage rates will likely have clients considering both fixed and variable rates. Which one will prove to be the best option?

"I believe variable rate or fixed term rate is subject to each client's needs and financial circumstances," Angela Wong-Lao of Invis The Money Lady wrote on "We cannot use one-size fits all to assist our clients' needs."

Talk of variable vs. fixed rates has been heating up following the Bank of Canada’s recent rate cut and one Toronto broker is pushing variable rates in a release to the public. But is that the right move?

"This is big news for a market that was not expecting a drop in the Prime Rate today," said Marcus Tzaferis, Chief Economist at MorCan Direct said in an official news release. "As predicted in our last newsletter, the price of oil will have a dramatic impact on mortgage rates this year, and this is probably just the beginning. This is great long-term news for Variable Rate Mortgage holders. It could also be great news for Fixed Rate Mortgage holders… as long as they act quickly."

The advice is contrary to what many brokers are saying – that fixed rates will come down and likely become the most attractive option for homebuyers.

“I personally think if we stay where we are, I think you might see five year mortgage rates drop to 2.69 per cent and I’m talking about non-discounted rates,” Brian Matthey of Verico the Mortgage Professionals told last week. “It’s going to make the fixed rate from a qualification standpoint very attractive compared to the variable.”

Rate talk has ramped up since the Bank of Canada slashed its overnight rate target for the first time since September 2010.

The reason for the cut was due to sharp declines in oil prices, which are expected to result in negative growth and inflation for the country.
  • J G on 2015-01-26 11:43:37 AM

    The best thing to do is advise your client based on their needs. If a client isn't risky, don't force them into a variable. Some people like the comfort of knowing that payment each month - yes even if it costs them more in interest.

  • Angela Wong-Liao - Invis on 2015-01-26 12:16:53 PM

    I believe variable rate or fixed term rate is subject to each client's needs and financial circumstances. We cannot use one size fits all to assist our clients' needs.

  • Joe Potenza on 2015-01-26 1:01:17 PM

    I fully agree with sentiments/comments with both J G and Angela.

  • Keith on 2015-01-27 4:18:12 PM

    RBC just lowered Prime rate!

  • Alain Payette on 2015-02-01 2:37:29 PM

    There are other aspects to make a choice that needs to be look at. As the penalty of three months on the variable and with the divorce rate as high as it is a lot of couples will sell before 3 years, the capitalization rate is better with a low rate. Is the variable transferable to a fix with a decent rate and no penalty ? Only a virtual bank will transparent on it's best rates when you transfer from a variable to a fix rate.

  • Hamed on 2015-02-01 11:06:32 PM

    But remember for the variable rate the client must be qualify at 5% and some people have to get the fix rate because they can't be qualify for the variable. The greedy banks are still dreaming of rate hike but the realty is the prime rate will go as low as 0% and prime rate as low 2% or less. This low rates will stay for at least next 20 years. If you can't believe it just wait and see.

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