It is better to be well informed in confusing times!

Today I received this information from mortgage broker, Mark Mighton.  He speaks about the difference in obtaining a fixed mortgage as opposed to a variable one.  I decided to post this because I like to keep my clients informed about what is going on in the financial world.  Information like this makes one make good informed decisions when choosing which mortgage is the right one.  I quote:

Confused: Fixed or Variable

Choosing between a fixed and variable mortgage is a hard decision and a discussion I am having a lot this week.  The best 5 year fixed mortgages are priced below 3.5% and the best variable rate mortgages around prime less 0.75%.  With prime at 3% that equates to 2.25%.
I constantly read reports from the Bank of Canada and Canada's top economists trying to get an edge on what is going to happen with our economy and mortgage rates so I can offer good advice to my mortgage clients,  The information has been all over the map this week.
On CBC yesterday the Bank of Canada's chief Mark Carney said "Upside risks are balanced with downside risks...The upside is as likely as the downside."  are you kidding me. CIBC economist Benjamin Tal translated this into "What Carney is telling us is the Bank of Canada has no clue what is going to happen."

Tal added:

  • "The bond market is pricing in inflation below 1.50% for the next ten years." (But he believes "the bond market is mispricing inflation.")
  • The Bank of Canada now predicts the economy won't reach its full potential until year-end 2012, one year later than previously expected.
  • The Bank of Canadadoesn't need to raise rates to slow consumer credit because "it's already happening."
  • Consumer spending capability is at a "30-year low." It won't take many rate hikes to slow the economy from here.

As a result, Tal asserted: "I don't expect (variable or fixed) mortgage rates to rise in any significant way in the next 12 months." There is "no rush to make a mortgage decision."

When someone in the audience asked him which mortgage he'd take today (fixed or variable), Tal replied:

"I'm almost convinced that over the next 2-3 years variable will be better. In the last two years fixed will be better. But, the gap (between fixed and variable) will not be significant over five years."

That said, if he had to choose today, he feels that "mathematically speaking," variable-rate mortgages will "probably" outperform fixed rates.  I would agree and am speculating that a 5 year variable will have a slight edge over a 5 year fixed.  I also don't expect the gap to be huge.


Have a great weekend and feel free to get in touch and talk mortgages anytime.



Mark Mighton
Mortgage Broker
Homefree Mortgages

phone: 905 338 8458
fax: 905 338 7365


 As always, thank you for the information Mark.  It is always best to keep my clients informed.

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Manuel Bustamante

Manuel Bustamante

Sales Representative
CENTURY 21 Miller Real Estate Ltd., Brokerage*
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