The Bank of Canada announced yesterday no rate increase to the overnight rate. This is the 29th consecutive meeting with no change.

This means stable variable mortgage rates and Line of Credit rates for Canadian consumers.

Some quick facts:

  • Today’s overnight rate: 1%
  • Today’s prime rate: 3%
  • Last rate change: June 1, 2010
  • Next BoC Rate Announcement: April 16, 2014

Variable Rate Mortgage vs. Fixed Rate Mortgage

With every client we work with we take the time to understand where the client is today and what their goals are for the future. From there, it is our job to give the client options on a mortgage plan and products. See how I didn’t just say “give the clients a bunch of rates to pick?”

Let’s look at fixed vs variable:

Fixed Rate Mortgage

Mortgage terms are set for the duration of the selected term. The interest rate and payments do not fluctuate

Pro’s:

  • Lock in rate and payment for the duration of mortgage term
  • Allows for easiest budgeting
  • No stress or anxiety about rates increasing within term

Con’s:

  • You typically pay a premium over a variable mortgage
  • Penalty can be higher than a variable mortgage

Variable Rate Mortgage

Mortgage terms fluctuate with Bank of Canada Prime Rate. Interest and payments can increase or decrease with Prime.

Pro’s: 

  • Can save interest by “floating” with a variable mortgage
  • Typically a lesser penalty than a fixed mortgage
  • Interest savings can allow for rapid mortgage repayment

Con’s: 

  • Uncertainty of rate can be stressful
  • Increases in prime rate can make budgeting difficult

 

There really is no “better” option for everyone. All it takes to find out what is better for you is to sit down with a mortgage advisor that cares about you. Someone that will ask questions about your current situation, your goals and your tolerance to risk and market conditions. We would be honored to be that someone.

#SMGCARES