The widening difference between fixed and variable rates has created more temptation for borrowers to roll the dice on interest rates. Certainly, talk about long-term low rates adds to that temptation and if the next five years are anything like the last five, it would be a good decision.
In the absence of a reliable crystal ball, a key deciding factor remains what will allow you to sleep best at night.
Taking the emotion out of the decision for a moment, here's an example to ponder...
if we make a seemingly moderate assumption that over the next five years variable rates only rise 0.25% in years 2-5, the interest cost will still be $1,404* higher. Even if interest savings in the early years are applied as a pre-payment, your net worth would still be $675 lower!
I’ve had clients benefit greatly over the last few years from a variable rate mortgage. Still, it’s anyone’s guess how the next 5 years will go so I would be pleased to help anyone weigh the options for their circumstances.
Elisha Ewonchuk, AMP
Mortgage Alliance Company of Canada