As you may have heard us say many times, variable rates mortgages have a lot of advantages for investors. Variable rate mortgages are usually much easier and cheaper to break, and therefore offer flexibility real estate investors need. Fixed rate mortgages on the other hand tend to be more costly to break. So really watch the fine print before you make any commitments. Don’t assume the savings are a slam dunk either, even after today’s announcement, fixed rates mortgages are still around 2.0% higher than variable rates on average (this is guaranteed to change in the next few days, and there is a difference between lenders, but for now we are using 2% for quick math). Think of this 2% as the premium the bank is charging you to insure against the risk of higher interest rates. It also means variable rates need to go higher by another 2% before locking in starts to make sense, and not only that, but that rates will NOT come down back during the remaining term of your fixed rate mortgage (usually 5 years). I offer you no forecasts or guarantees, but all I can say, the pure odds are in your favour to save money if you stick with variable. If you are very concerned and rates are really keeping you up at night, lock into a shorter term fixed rate mortgage, such as 1 or 2 years.
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