Variable Mortgage Rate Holders may be starting to panic…BUT here’s why you should avoid the temptation of going Fixed right now

Remember, Banks are positioned to profit from this kind of environment. They will seduce you with a free offer, they will try to convince you that rates will continue climbing until they reach the moon, and that it would be unwise to ride out a variable rate as we head into a possible recession.

The fact is the time to lock in has passed, the low 5year fixed rates are long past us.

Why are so many mortgage brokers advocates for variable rate products? Because over the years, thousands of clients have saved tens of thousands of dollars in interest costs and cut years off their amortization

Many clients are initially dead set against going the variable route, due to the ongoing myths about it, but with time, have come to understand how variable rates can work in their favour

Locking into a fixed rate with penalty handcuffs could pose a challenge if you need to refinance, downsize, or break the mortgage prior to the end of its term

Here are 5 things to consider before locking into a fixed rate mortgage

*VARIABLE RATES ARE STILL VERY COMPETITIVE

If you lock in now, you could end up paying almost double what you would with your current variable interest rate. Even with a couple more hikes, you’re still likely to be well below current fixed rates

*WE’RE FAR FROM PRE-PANDEMIC LENDING RATES

Even with the recent increases, the Bank’s benchmark rate is still lower than before the pandemic. The variable rate mortgage was a great option pre-pandemic and it remains so now

*REMEMBER THAT YOU’VE BEEN STRESS TESTED

The mortgage qualifying rate in Canada has been 5.25% for quite some time now, which means all mortgage holders should be able to comfortably withstand interest rates that fall below that threshold

*RATE HIKES ARE NECESSARY-FOR NOW

Rate hikes are a necessary tool the central bank uses to rein in inflation and it could take 12-18mths to do so. Once the target rate of inflation is achieved, rates will subside to neutral levels

*TAKE ADVANTAGE OF CURRENT RATES TO PAY DOWN DEBT

Paying back debt more quickly mitigates the risk of rising interest rates, because you owe less money. Instead of paying the bank more interest, you’ll end up paying down your mortgage faster

V Gaetano