So, 5 years ago we signed a new term for our mortgage. We went with 2.69%, fixed. Looking back, we would have saved a bit of money if we had gone for variable, but part of that is due to the pandemic which of course could not have ben predicted. And now we are up for renewal again.
Given world uncertainty, I almost instantly figured we would be best off going fixed again. RBC is offering the same rate as 5 years ago - 2.69%. Pretty good rate - especially since the banks are already told they will be raising interest rates shortly. But they also offered me a 5 year variable at prime minus 1.1% - which seems compelling. Currently, that starts our new term off at 1.35%. Uber low. We could probably get even lower with a no-name mortgage company, but would rather stick with RBC if possible.
Then I looked over the data:
If we went with variable AND rates stayed where they are, we'd save about $14,000 over the course of the term. That's significant. But let's face it, interest rates are lower now than ever and it can't last forever so it's pretty guaranteed this amount would be less than 14k savings after 5 years.
Then I happened upon this information from mortgagesandbox.com, which predicts the rates may rise noticeably over 2023. Even still, we'd still be sitting good at the end of 2023 with a variable. It's more what happens for the remaining 4 years of the mortgage that makes me wonder if it would continue at the same pace - thereby making fixed the better option.
Then I noticed two things:
1) It seems the rates have been kept partially low due to the pandemic, and I'm personally not confident it will end any time soon. This might actually delay the expected rise for some time.
2) I have to go back 14 years (I believe) to find interest rates that would end up higher on a variable with prime -1.1. 14 years straight, variable has been the way to go. So from a mid-level perspective, wouldn't it stand to reason the next 5 years are at least more likely than not to follow suit?)
Anyway, what are your guys thoughts? Anyone have any amazing insight to provide that makes the decision clear, or is anyone else up for renewal soon and are wondering the same things?
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