Are Fixed Rates Better?-Tony Machigiano

There's been a lot of talk and media coverage around the ultra low fixed rates that are currently being offered. BMO started at 2.99% for 5 years however they announced today that rate is now going up to 3.49%. Two days after BMO announced this rate most of the other banks, including RBC, came out with a 4 year fixed term at 2.99% but with less restrictions.

Historically speaking people who have went with a Variable rate mortgage as compared to people who constantly take 5 year fixed terms have over the last 25 and 50 year periods paid less interest over the long term. That may not be the case over the next 4 or 5 years.

It just might be a very good time to take a fixed rate mortgage. Not only because these rates are so low but also because the spread between Fixed & Variable has never been less. Normally the difference in rate between a fixed and variable mortgage term is at least 1 or 2% Not anymore. It may in the future again but not today. The best Variable rate out there right now is most likely around 2.8%. So with 4 and 5 year mortgages now being offered at 2.99% you can see there is little difference in the rate but you benefit with the fixed rate as it will stay the same over the next 4 to 5 years. 

RBC's current economic forecast for rates in Canada is predicting the Bank of Canada will possibly hike the Prime rate from 3% today to 3.25% near the end of this year and to 4% by the end of 2013. 


A good mortgage advisor should be discussing this current rate environment with you and making recommendations according to your particular needs and circumstances.

Sincerely, Tony


Tony Marchigiano | Mortgage Specialist - Mortgage Sales BC Region, RBC Royal Bank | Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054



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