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December 04, 2021

Is it finally time to lock in your mortgage?

Is now the time to lock in your mortgage? No, not yet, mortgage broker David Larock maintains.

Traditionally, a five-year fixed-rate mortgage has been about 1.5 percentage points higher than the five-year variable rate, depending on the prevailing yield curve. Today, you can get a five-year fixed mortgage for much less than that. 

Fixed-rate mortgages have traditionally been popular among first-time buyers looking for predictability in their payments. But the Bank of Canada's recent decision to stand firm on rates is likely going to keep variable-rate mortgages attractive for some time.

Larock says he’s able to offer his clients five-year variable-rate mortgages at prime minus 0.4 percentage points, or 2.6 per cent. Five-year fixed-rate mortgages can be had for 2.99 per cent, he says.

Most studies says that variable-rate mortgages have worked out to be better than fixed-rate mortgages over the past 25 years. And the difference was fairly dramatic, saving consumers thousands in potential interest costs. But is this likely to be the case going forward?

Yes, says Larock.

"I think borrowers who are currently in the market for a new mortgage and who are comfortable with fluctuating payments will save money with a variable rate over the term of their mortgage (as long as it is five years or less).

I also think that borrowers who already have a variable-rate mortgage (especially a deeply discounted one) should think twice before they convert to a fixed rate in today’s environment."

Are you grappling with the mortgage rate dilemma? What choice are you leaning towards and why?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...