What do you consider a good mortgage rate, as of July 23rd, 2006?

[milhaus]

I'm currently deciding between mortgages and here are my choices:
1) prime -1.5 for a year, prime -0.5 for the rest of five year term; convertible to fixed at wholesale
2) prime -0.9 for the whole term; same convertibility
3) 5.3 for five year, 5.4 for seven year closed fixed rate mortgages

We're talking excellent credit, good downpayment here. Since the BOC seems to have hit the top with IR, I was thinking (1) for a year, then convert to the fixed?

Or can I do better than these rates?

[adamtheman]

Everyone will have a different opinion as to what you should do. The only thing I will chime in with is in regards to your opinion on the BOC being done with interest rate increases. I think, if you look at the housing market, at least in BC, you will see that prices are still over-inflated, that people are still buying like mad, and that things really haven't cooled down. You will also see, by looking at interest rates historically, that we are still well below what they used to be. So to say that prime is going to stop at 6.00% is nuts. I think the BOC may sit tight for a bit, but bottom line is that prime is only headed upwards long-term.

Does that mean that it's naive to lock-in to a variable mortgage? Not really. But it's a higher risk now than it would have been say 3 years ago. You need to look at the gamble and see what is worth it. A fixed rate over 5 years at 5.30% is 0.7% below prime. So a variable rate at 0.9% below prime for the term does not seem to be like a very good deal. So right away, I'd throw out option #2. So that leaves option #1 and #3.

It's up to you what you do. I just locked into a 5 year fixed and got a rate of 5.20%. I was lucky enough to have a quoted rate I got back from PC Financial for 5.27% back in March. The credit union I'm dealing with then beat it to the nearest 10th. They were actually going to give me 5.10%. It's all relative though, 0.10% only makes a small difference. But if prime were to hit even 7% then you'd be up to 5.50%, even with a -1.5% prime. And then you'd be screwed, because if you go to convert to a fixed you will get an even higher rate like 6.00%.


Whatever decision you make, best of luck to you.

I'm currently deciding between mortgages and here are my choices:
1) prime -1.5 for a year, prime -0.5 for the rest of five year term; convertible to fixed at wholesale
2) prime -0.9 for the whole term; same convertibility
3) 5.3 for five year, 5.4 for seven year closed fixed rate mortgages

We're talking excellent credit, good downpayment here. Since the BOC seems to have hit the top with IR, I was thinking (1) for a year, then convert to the fixed?

Or can I do better than these rates?

[milhaus]

My current literature is predicting a drop in interest rates next year; that's why I'm very interested in option #1, with the idea of moving into a fixed when they do drop.

[Hubster]

I definitely concur with adamtheman. The following is what I posted elsewhere yesterday in response to a question from a first time buyer. I am unsure if that is your situation, but I would generally state the same:

Quote

"As a first time home buyer, I would recommend you not even consider Variable Rate Mortgages. While I highly recommended these for several years, I hardly ever do today, and definitely not to first time homebuyers.

Many savings were realized over the past few years with VRM's (myself included), but the spread between these and fixed rates is no longer significant and the risks are too high, IMHO. As a first time buyer, you need to be as certain as you can what your fixed monthly costs will be and ideally for as long as possible.

VRM payments will fluctuate based on the Prime rate (fixed rates are based on the bond market) changing and no one is certain if the increases have ceased as yet. No increase was issued at the last meeting for the BoC and the indications are they have ceased for the near future, but that can change at any point. The prime rate has increased seven time since September 2005!

It is tough to budget when you are uncertain what the next month brings and even tougher to sleep at night if the next mortgage payment increase will put you in an uncomfortable financial postion. The VRM "game" is simply not worth it for most people TODAY."


Good Luck!

[Ducky]

with variable rate mortgages, you can choose to have your payments remain the same even with interest rate hikes...just more of the payment goes to interest instead of principal...thus increasing your ammortization...

I definitely concur with adamtheman. The following is what I posted elsewhere yesterday in response to a question from a first time buyer. I am unsure if that is your situation, but I would generally state the same:

Quote

"As a first time home buyer, I would recommend you not even consider Variable Rate Mortgages. While I highly recommended these for several years, I hardly ever do today, and definitely not to first time homebuyers.

Many savings were realized over the past few years with VRM's (myself included), but the spread between these and fixed rates is no longer significant and the risks are too high, IMHO. As a first time buyer, you need to be as certain as you can what your fixed monthly costs will be and ideally for as long as possible.

VRM payments will fluctuate based on the Prime rate (fixed rates are based on the bond market) changing and no one is certain if the increases have ceased as yet. No increase was issued at the last meeting for the BoC and the indications are they have ceased for the near future, but that can change at any point. The prime rate has increased seven time since September 2005!

It is tough to budget when you are uncertain what the next month brings and even tougher to sleep at night if the next mortgage payment increase will put you in an uncomfortable financial postion. The VRM "game" is simply not worth it for most people TODAY."


Good Luck!

[Rosico]

with variable rate mortgages, you can choose to have your payments remain the same even with interest rate hikes...just more of the payment goes to interest instead of principal...thus increasing your ammortization...

What is that option called? I've been well served by my variable and have read that rates will go down a bit short term but increase overall long term.

[Ducky]

you just tell whoever u have your mortgage with...that u want your mortgage payments to remain the same with any interest increase/decrease.


What is that option called? I've been well served by my variable and have read that rates will go down a bit short term but increase overall long term.