Sign up via our FREE e-mail subscription service to receive notifications when new INTEREST RATE information is available. Lenders are constantly changing their rates, or offering us special deals. Let us do the leg work for you, and keep you up to date on Interest Rate changes.

Get Email Updates · Ask a Question · Apply Now

Posts Tagged ‘Fixed Rate’

Bank of Canada Keeps Overnight Rate for NOW

Wednesday, April 21st, 2010

The Bank of Canada announced yesterday that they would maintain their overnight rate at 0.25%.

This means that the Prime Lending Rate will remain for now at 2.25%.  The next chance for the Bank of Canada to raise their rate is June 1st.  It is expected at that time that they will start to increase the rate.

Variable Mortgage rates, which are tied to the Bank of Canada overnight rate and the Prime Lending Rate, remain unchanged as a result.

Lenders are currently offering 5 year Variable Mortgages at Prime – 0.5%.  This means that you can lock in these terms for 5 years.  The Interest Rate of 1.75% would be your interest rate now until the bank of Canada raises their rate.  Then your interest rate would go up, probably by 0.25%.  Your monthly (or weekly or bi-weekly) payment will also go up.

Current 5 year fixed rates are sitting at 4.39 %(best rate out of 30 lenders).  Only if the Bank of Canada increased their overnight rate 10 times during the term (5 year), would you be paying equal to or more interest than a variable rate mortgage.  Remember that a variable rate mortgage can always be converted to a fixed rate mortgage at any time during your term as long as you stay with the same lender.

Tags: , , ,

Fixed vs Variable Mortgage Interest Rates

Wednesday, April 7th, 2010

Many people shopping for a mortgage are often confused about the advantages and disadvantages about a Fixed vs a Variable Interest rate on their mortgage.

By definition a Fixed Interest Rate does not change for the entire term of the mortgage.  A Variable rate mortgage changes each time that the Lender’s Prime Rate changes.  This is usually directly linked to the Bank of Canada Rate.

As of today, the Bank of Canada’s rate is 0.25, and the Prime Lending Rate is 2.25%.  The next possible rate increase is April 20th.  The Bank of Canada has 8 opportunities during one year to decide to raise their prime lending rate, or leave it unchanged.  Experts currently are estimating that the Prime Lending Rate will start to rise by this summer.

Fixed Interest Rates:

Benefits of a Fixed Rate:

Easy to budget; your payment will remain constant for the term of your mortgage.   Security; you can feel secure that your rate will not change for the term of your mortgage.  This is usually the choice for First Time Homebuyers.

Cons of a Fixed Rate:

Potential loss of savings if you are paying more than the variable rate

Variable Interest Rates:

Benefits of a Variable Rate:

Savings!  Generally a Variable Rate mortgage will save you the most money in interest.

Ability to switch to a Fixed Rate; most variable rate mortgages are easily converted to a fixed rate at a point that the borrower chooses.

Lower penalty to break your mortgage; most Variable Rate mortgages have a penalty to break the mortgage equal to 3 months interest.  Most Fixed Rate mortgages have a penalty that is the greater of 3 months interest or the Interest Rate Differential.  Low fixed rates have been creating havoc in recent years where the Interest Rate Differential is costing borrowers thousands of dollars more to break their mortgage.

Cons of a Variable Rate:

Budgeting: your monthly payment may change, either go up or down, depending on the prime lending rate, so it is more difficult to budget your cash flow each month.

Risk; there is some level of risk if the interest rate rises.  Thus it is important for a borrower who chooses a variable rate to be informed and watch the Interest Rates.    You can also talk to your Mortgage Agent about watching the markets for you.

Tags: , , ,