One of the most common questions I’m hearing from clients these days is: should I choose a fixed or variable mortgage rate?
With Canada’s CPI down to 2% and the U.S. cutting rates by 50 basis points this week, along with rising unemployment, there’s a possibility that the prime rate could drop even lower than we originally anticipated. Early predictions suggested that the Bank of Canada (BoC) might stop rate cuts around 3%, but now figures like 2.50% or even lower are looking quite feasible.
Historically, fixed rates rose before the BoC started its aggressive rate hikes, as these rates are influenced by bond yields, which are shaped by trends predicted by sophisticated traders. So, could we see a 5-year fixed rate at 3.50% in the future? It’s definitely possible.
Now, back to the burning question: should you go fixed or variable? Why not consider a mix of both?
A strategic approach could be to start with a variable rate mortgage, taking advantage of potential rate decreases as the BoC continues to cut rates. Once fixed rates hit their lowest point, you can then lock in a 5-year fixed rate—often at no additional cost.
This blended strategy could give you the best of both worlds. As always, it’s important to evaluate your financial situation and consult with a mortgage professional to find the best option for you.
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