Fixed or variable, who cares? It’s a good time to get a mortgage

As the pundits debate the Bank of Canada’s next move, it has become crystal clear that mortgage rates will not go up for a long, long time.

And that makes now a great time to borrow for a home, according to Clarity Financial mortgage broker Ranjit Dhaliwal. He says long-term home buyers outside of the red-hot condo markets of Toronto and Vancouver need not worry about whether higher rates will burst a housing bubble. He says that kind of talk has been putting potential homebuyers on the sidelines for seven years. He says mortgage rates are at historic lows, and they will stay there for a while.

When it comes to choosing a variable or fixed rate mortgage, he’s not so certain. He pegs the average five-year variable rate mortgage at 2.1 percent and the average five-year fixed rate at 2.6 percent. It might seem like a no-brainer for variable rate borrowers to pay a few basis points more to forego the risk of being exposed to the whims of the interest rate market for the safety of a locked-in rate. But Dhaliwal says mortgage rates could fall even further, adding that a 1.5 percent five-year fixed rate is not out of the question.

He says lower borrowing rates are also giving the banks more room to lower mortgage rates. According to his calculations, the difference between what it costs them to borrow and what they charge borrowers is bigger than normal. That means lenders will have more wiggle room for homeowners who want to negotiate a better deal.

BNN

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