Your Mortgage Options in Today's Market
April 17, 2020 | Posted by: Mike Garganis
I am going to briefly summarize the different scenarios that exist to provide some guidance in assessing your individual circumstances.
If you have a variable mortgage with a discount off of the Prime rate…..
If you are one of the lucky people who are enjoying a discounted variable mortgage, enjoy it. With the Prime rate presently sitting at 2.45% even moderately discounted variable mortgages have effective rates that are now below 2%. I had a client email me recently who has a variable mortgage at P-1% who was looking to lock into a fixed rate and I explained that if they did, they would be replacing a rate of 1.45% with a new fixed rate of over 3%.. That conversation ended very quickly…….
Stay tuned for the news on rates because at some point fixed rates will start to fall. Our goal will be to lock you in when they hit the low point before things recover and Prime starts to make its ascent back up to normal levels. This is not likely to happen any time soon however as I expect Prime to remain at the current level for well into next year.
If you have a fixed rate below 3%.....
For those of you who have a fixed rate in the mid to low 3% range, there is little for you to do right now because fixed rates at present are still hovering around 3%. Until they begin to fall there is no need to immediately respond. I would not recommend moving to a variable either because at present Variable mortgages are being offered either at or near Prime. Lenders are not able to offer the attractive discounted variable products due to compressed spreads and liquidity shortages (e.g. Prime - .9%). Until that happens there is little benefit associated with paying a penalty to move into a rate similar to the one you presently have.
If you have a fixed rate in the mid to high 3% range…..
For those of you in this situation, it certainly bears consideration to assess your options and evaluate a potential plan of attack. If we can break your mortgage and replace it with something much more competitive (either a considerably lower fixed rate) then you may be able to benefit. One of the options is to take a variable mortgage and wait for the fixed rates to fall before locking in.
Bottom line is there is something to consider. If this sounds like your scenario, then please reach out to us so we can assess your options and develop a customized plan for you.