Got offered a 4% variable open.

[old&slow]

Only thing I really know about mortgages is that low interest and shorter amortizations are good. Plus payment frequency.
We do weekly.

With interest rates guaranteed to rise, is it wise to go variable. I'm pretty sure it won't stay at 4% very long.
I figure I'll be in present house for the next 3 to 5 years.

I am concluding a 5 year 4.68% now. My personal thought is to get another 5 yr at the best rate that I an find.

What's the thoughts on variable verses the closed?

[Masked Bandit]

We've run nothing but variable over the past seven years. I can't recall a time where the fixed was even close to the variable.

Isn't a five year fixed somewhere around 6.75% now?

[Canmorite]

Variables usually outperform fixed rates. The $CAD has been losing some steam because of rumored easing on interest rates from the BoC, but that doesn't mean the prime rate will go down.

As the housing slump continues in the states, and slowing is still occuring in Canada, banks aren't willing to take on as much risk, which means they charge a higher interest rate (prime) for the same loan. They want to get paid for taking on more risk (however more risky it may be, I don't know).

If you can sleep at night knowing your rate can fluctuate, I think you should be fine over 5 years with 4% variable. The probability of re-visiting the 80's with 15%+ interest rates seems unlikely.

[liquid1010]

Originally posted by Canmorite
Variables usually outperform fixed rates. The $CAD has been losing some steam because of rumored easing on interest rates from the BoC, but that doesn't mean the prime rate will go down.

As the housing slump continues in the states, and slowing is still occuring in Canada, banks aren't willing to take on as much risk, which means they charge a higher interest rate (prime) for the same loan. They want to get paid for taking on more risk (however more risky it may be, I don't know).

If you can sleep at night knowing your rate can fluctuate, I think you should be fine over 5 years with 4% variable. The probability of re-visiting the 80's with 15%+ interest rates seems unlikely.

Well said.

It's very much a situation of risk/reward. If you can barely make the payments at 4 or 5%, I may consider locking in just for comfort and assurance. If you're not "tight" on your payments, then a variable mortgage would probably be the better option. Rates will rise, however the question lies in if they will rise enough to cover the 200 basis point spread.

[lint]

who offered the 4% open variable? Best I've seen these days is p-0.6 = 4.15

[88jbody]

the question should be IF rates jump, can you still afford the payments?

[in*10*se]

still sitting at p - .85 = 3.9 w/ one of the major canadian banks

[Shaolin]

Scotia has 4% 5 year Open
CIBC has 3.9% 5 year Closed

[natejj]

Originally posted by Shaolin
Scotia has 4% 5 year Open
CIBC has 3.9% 5 year Closed

Preeeetty sure there are not 3.9% 5 year closed out there... thats a godly rate.... CIBC's 5 year closed is 7.15

http://www.cibc.com/ca/rates/index.html

[skandalouz_08]

Originally posted by natejj


Preeeetty sure there are not 3.9% 5 year closed out there... thats a godly rate.... CIBC's 5 year closed is 7.15

http://www.cibc.com/ca/rates/index.html

It's possible for a varibale to be at 3.9% which probably wouldn't be advertised. Most brokers should be able to get you 4%, and if they can't you need to find a different broker.

[Canmorite]

3.9 closed? Sign me up