A few weeks ago we could find variable-rate mortgages at prime minus .80 or better but today that is a different story. With all the economic trouble in the world and lender profit motives have shrunken variable discounts beyond anyone’s expectations.
Banks are currently offering prime rate with little to no discounts. With a few lenders lagging behind still offering prime minus .15 or .20 I am sure it will be days before they are gone. Some lenders even suggest they shall have to move to just offering prime or prime plus.
With 5 year fixed rates so appealing, it makes you recalculate whether variable is the way to go. The spreads are so small right now and as long as the client doesn’t have to move or sell in the next 5 years, you may have to wonder if this is a good option.
Interest rates for the past 2 decades have been trending downward but looking ahead, rates are no longer able to drop over one percent. The most we could hope for is an extended period of horizontal rate movement. The BoC still can cut rates slightly however the Europeans and American crisis and sub 2% core inflation won’t delay rate hikes forever.
When looking at mortgage options, as always take a close look at your life today, tomorrow and most importantly 5-10 years down the road. Make a plan that suits your lifestyle, income and goals. Take advantage of increasing your payments even if it means just by $20.00 a payment, something extra is always better than nothing. Try and see whether your able to take advantage of the Smith manuervre by taking your tax deduction and applying it toward your mortgage debt. Even reducing your amortization makes a huge difference.
As always home ownership has constantly been one of the best investments in the world and being in a position of owning your home free and clear is one of the greatest accomplishments one can make. No matter what happens, no one can take your home away from you and you always have a roof over your head.
If looking for options on the best mortgage strategy that suits you and your family, consult a qualified mortgage advisor to show you all your options and what they mean for you at the end of the day.