Some brokers still aren’t completely sold on the idea of variable ratesdespite the hike in fixed rates and the recent Bank of Canada announcement suggesting ARMs could remain at historic lows till 2015.
“I’m still not in the camp for the variable rate yet because the fixed rates are on the rise (and) if you take a variable rate right now you are going for that low, low rate,” Carolyn Dunlop of Dominion Lending Centres Edge Financial told MortgageBrokerNews.ca. “Once the Bank of Canada starts to raise those rates, you’re likely to be locked into higher rates.”
Despite indications that the overnight rate will be left untouched until 2015, Dunlop isn’t convinced the money a client saves in the short term with a variable rate will necessarily make up for a potential spikes in fixed and variable rates in the near future.
“The major question is what will save you now and what will save you later?” she said.
Still, most brokers are convinced the rate will, in fact, remain untouched for some months to come.
“I think that some of the changes they have made to lending rules have affected the market and I think they are trying to stay the course and not disrupt the market further,” Kevin Crigger of Mortgage Alliance told MBN. “There is nothing to indicate a change to the overnight rate; the economy is moving along decently, the real estate market is still very strong and I don’t think they want to rock the boat.”
For his part, Crigger isn’t yet sold on variable rates, either.
“I think it really depends on the person’s individual situation and tolerance for risk,” Crigger said. “Mortgage rates have been at unprecedented rates for a long time. Long-term rates represent security and, depending on their tolerance for risk, it’s still a good idea to go for fixed rates.”
The only absolute is that those currently in a variable rate will celebrate the Bank of Canada’s recent announcement.
“I think it’s great for those who are locked into the existing variable rates,” Dunlop said.