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Scotia Slashes its 10-year Rate

Scotiabank Scotiabank chopped its 10-year rate today from 7.15% to 5.25%.

It’s hard to remember a time when the 10-year was this low.  Scotia managing director, Charles Lambert, calls it “the perfect solution for customers who are looking for long-term interest rate comfort.”

The new rate “reflects the Canada Mortgage and Housing Corporation’s (CMHC‘s) recent expansion of the Canada Mortgage Bonds (CMB) Program,” Scotia said today.  CMHC added the 10-year Canada Mortgage Bond in July 2008, in part, to help bring down 10-year rates.

It will be interesting to see the uptake of Scotia’s 5.25% 10-year.  ING had a popular 5.55% 10-year fixed last year, but that was at a time when 5-year rates were much higher.  This time, Scotia’s 10-year is competing against 5-year fixed rates in the low 4% range.

Choosing a 10-year rate does provide long-term piece of mind but, like any insurance, there is a price.  For every $100,000 of mortgage you’ll pay $4798 more interest on a 10-year at 5.25% than a 5-year at 4.25%.  (That’s over the first five years, assuming a 25-year amortization.)