1. Interest Rates
*Interest rates as of June 11th, 2024. Rates subject to change (I have to write that 
)
Variable v.s. Fixed
Right now, we’re seeing quite a few people pick the variable rate over the 3-year fixed… I don’t blame them. Let’s take a look at the numbers.
The graph above shows rates decreasing by 0.75% from month 6-12 (technically, rates would decrease before that) and an additional 1.5% over the next two years. This is in line with what CMHC is predicting.
CMHC is predicting an additional 50% decrease in rates in 2024, and 1% decrease in 2025 and an additional 1% decrease in 2026.
The graph above shows that a borrower would be $5,700 better off (interest-wise) over the course of 3 years if they choose to take a variable. However, since the payments are higher to begin with ($320), they also pay almost $11,500 more in principal payments, providing for a $17,200 difference in final mortgage balance.
What’s important to note is that while I suspect/expect the variable rate to be the best bet, borrowers are also able to lock in their variable rate into a fixed rate at any time. This feature is called converatibility. So, for those who are squeamish on holding the variable rate, it’s my opinion that getting a variable rate now, while rates are still high, would be prudent because when rates decrease over the next 4-12 months, locking in at a lower rate is an option. So, a client may start with a rate of 6.15% and have it go down to 5.4%, but then be able to lock into a fixed rate at 4.5%… Food for thought.
It’s more important than ever to have a mortgage broker explain the ins and outs of what’s possible with mortgages and build a strategy that fits each client. We’re here to help!!