Rob Carrick from the Globe & Mail is ringing the alarm. With mortgage rates at 6-year highs and shrinking variable-rate discounts, he says it’s time to lock in now.
The need for urgency is debatable, however. Bond yields have drifted down lately and that’s usually a positive for fixed mortgage rates. In addition, noted CIBC economist, Benjamin Tal, says, “Over the next six months, it’s very reasonable to think that rates will be stable, with a bias downwards.” The Bank of Canada agrees.
Hmmm, mixed messages from the financial industry; who woulda thunk it?
Since I have no financial training, and only a very small clue as to how interest rates, the economy, bond rates, and mortgages are all like an arranged marriage I’m going to make my call.
I say now is not the time to lock in. Over the next little while inflation will increase slightly, especially when the gov’t decides to cut the GST another 1%. The pressure from the booming economy will push rates up in the short term to have prime at 6.75%, but then things will fall back in line and come 2009 we will be back in the 5.75% range. Once things calm down in mid-2009 and we’re back to business as usual you will see much more advertising that variable rates are the way to go . . . as soon as that happens you know banks are trying to sucker people in to buying in and then jacking rates up, so then is the time to lock in.
Is it just me or in 2004 and 2005 when we had lower rates everyone was really pushing variable rates in ads, now when rates are higher I haven’t seen anywhere near as many ads pushing variables. Isn’t that a little counter intuitive if you care about customers? . . . oh.
Hi Rob,
Every few years the Globe & Mail(Rob Carrick) says the same thing to the do it your self crowd.
Three years ago this advice would and still costs money. I think the five year rates were about 5.75% back then.
Today in the Globe the story is the same. Could he be right? Already there is signs of a slowing economy…see Greece.
http://www.theglobeandmail.com/globe-investor/personal-finance/fasten-your-seatbelts-home-buyers/article1419098/