Variable-rate mortgages are inching closer and closer to prime.
This week we saw a few lenders drop down to prime + 0.15%. Nationwide variable rates haven’t been this low since last fall.
Merix and MCAP were among the lenders cutting rates this week. Each is now offering prime + 0.15%, on 3-year and 32-month terms respectively.
You might ask yourself, “Why would I want a variable term under five years?”
The answer is based on the belief that variable-rate mortgages will once again be offered at discounts to prime. If that occurs in the next 3 years, then a 36-month term lets you reduce your rate quicker than if you were locked into a 5-year term (unless you broke early and paid the penalty, of course).
What’s more, these shorter-term variables are priced a little better than 5-year variables (2.40% for a 3-year versus 2.45% to 2.65% for a 5-year).
That is great news. I am enjoying 1.35% and 1.5% rates on my mortgages right now, due for renewal in 3 years. I not hoping to need to renew but if I should, I would consider this.
It is nice to see rates closer headed to normal.
I was wondering. Does anyone offer a one year variable?
This is just a guess but variable rates could be at prime by December. BAs are at 0.33% and prime is 2.25%, for spread of 1.92%. Take into account the premiums to BAs and there is still enough room to drop lower.