Fixed vs Variable
February 1, 2009 Fixed vs Variable - by Chantel Chapman Rates are at an all time low but you may be wondering which rate will produce the most savings- the fixed mortgage rate or the variable/ floating mortgage rate? Fixed mortgage rates do not change over your term no matter what the rates are doing in the economy. The fixed rates give owners a piece of mind by eliminating interest rate uncertainty associated with mortgage payments. Variable rate mortgages float with the Bank of Canada’s prime rate. Research has shown that over time the variable rate will give the most savings as the prime rate is usually lower than the fixed rates. In exchange for the potential savings you will risk the chance of rate increases. Most lenders will allow you to switch from the variable to a fixed rate at any time in your term without any penalty. As your mortgage broker, I will continue to contact you through out your mortgage term to keep you informed of any rate changes. I will give my advice as to whether it would be worth it to switch to the fixed from the variable rate. If you are buying a property or simply renewing your mortgage, I would recommend the variable rate at this time. Benjamin Tal- Chief Economist for CIBC has said that mortgage rates both fixed and variable will see another drop in the upcoming months. After the drop the rates will be steady for 2009. Benjamin Tal has predicted a bump in inflation which could increase rates in 2010. The variable rate would give you the most savings for 2009 and if you feel uncertainty with leaving your rate floating for 2010, you can lock into the current fixed rate before then to take advantage of the low fixed rate sales.
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