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).