What do you need to save to buy a house? Here, we review the major expenses of buying: your down payment and mortgage costs.
Don’t Butt Heads Over Rates
Time, experience, market trends and client satisfaction settled the matter long ago. Variable rate mortgage products are the reigning champ and unlikely to be unseated anytime soon.
Different, But Not Equal
As the name suggests, a fixed rate mortgage product means the payment you make will remain the same for the entire length of the mortgage. Attractive to many consumers seeking stability in their financial planning.
Fixed rates are offered at a higher rate than variable- the price you pay for the supposed peace of mind a set payment provides.
In a variable rate mortgage, your payments can increase or decrease at the whim of the financial industry – an initially intimidating prospect for the naturally risk-averse.
Variable-Rate changes with the prime lending rate as set by your lender. Quoted as Prime +/- a specific amount, like Prime -.25%, Prime lending rates might fluctuate but the relationship to Prime stays constant over your term (you always have the -.25% off Prime).
Context is Everything
Without context, it’s easy to declare fixed-rate mortgage products as a safe bet for consumers seeking financial security.
This would be a mistake.
Historically, variable-rate mortgages are less expensive over time regardless of market fluctuations.
A long time ago (the 1980’s) Bank of Canada set its benchmark rate so high that the average mortgage rate was approximately 21%.
Since that peak, in the ensuing 30 years, the average rate has consistently declined- increasing popularity in variable rate mortgage products. Even with Bank of Canada’s recent increase by .25%, financial predictions indicate that any rate normalization will be slow, steady and measured.
Giving variable rate clients plenty of time to lock-in their rate, should they so desire.
In our experience, the majority of consumers would benefit from resisting the siren song of fixed-rate mortgage products.
While income, lifestyle, and risk tolerance are all determining factors in the mortgage solutions we individually customize. We are confident in saying the majority of clients absolutely benefit from choosing a variable rate mortgage.
Still on the Fence?
Speaking with an unbiased mortgage professional about your specific situation will help you land on the right side.
If you’re curious about the current rates you can find them here.
Have more questions? Feel free to contact us!