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
- "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.
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fax: 905 338 7365
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