You need to know the pros and cons of fixed vs. variable mortgage rates! This will help you decide which mortgage type is the best answer for your mortgage needs.
What is a fixed rate mortgage?
A fixed rate mortgage means your interest rates and payments are set for the duration of your mortgage.
Fixed rate mortgages offer stability and makes budgeting for your mortgage much easier, but you may end up paying more over the course of your mortgage.
What is a variable rate mortgage?
A variable rate mortgage fluctuates with the market interest rate, also known as the "prime rate". Your payments will either change alongside the market rates, or the interest portion of your payments will vary.
With variable rate mortgages, there is always a level of uncertainty about your rates and how much you will be paying, however history shows that variable rate mortgages tend to be less expensive over time.
As you can see the only time period where variable rates are higher is the period of 1988 and 1989 where speculation and inflation ran very high and was the beginning of our last recession which lasted till 1992.
It is interesting to see how the Canadian Government started raising rates at the end of 1992 quite aggressively only to reverse their decision within a year. This may be where we are today only this time individuals had accumulated much more debt than back then which will lead to very slow growth going forward.
Contact Paul Mangion for a free evaluation and to find out how a variable or fixed rate mortgage can work for you.