[Sampson]

On the same thread as a recent discussion at CC, has the spread between fixed rate mortgages and variable rate mortgages narrowed to the point where its now better to go with the fixed rate?

We've been shopping around to break our existing mortgages, looking and modeling ALL options.

The best variable rates we've been offered have been prime + 0.8% (3.3%). Fixed rates have now come down, and we were offered 3.95% for 5-year closed from one of the 5 big banks.

However, ScotiaBank is now offered 1-year rates at 3.0% - with the option of locking in at the posted 5 year rate minus 1.25% (4.2% as of today).

To me, it seems like they are wanting you to lock in for 1 year - my read on this is they predict rates will be up in 1 years time.

Am I reading too much into this? I know bond yields look to be rising again, and unless the earnings coming out now are horrible, could the stimulus be giving a bit of a bounce to the economy?

 

[Sampson]

So FT,

I guess this means you are some what fearful of very high inflation starting day X, and continuing 2 years from now?

I'm in two fixed rates (bad, bad, bad) now, and for me or anyone new, I think its a no brainer.

I guess I was after peoples predictions of how long high inflationary pressures would last. I'm actually somewhat worried that it might go on longer than 5 yrs.

 

[Sampson]

Rates could obviously go sideways for some time as governments realize their money hasn't been effective in jump starting the economy.

I no longer see it as a "rates can only go up from here" as I once did.

Because the best VRM available to me now is 3.3% - there's no justification for having exposure to fluctuating rates. I'll just lock in at 4.1% - and take my 'cash back'.