Most mortgage shoppers are still in love with fixed rates, but many have been licking their chops with variable rates near 2%.
That’s driving new interest in short-term variable mortgages. Just last Thursday, Home Trust became the 2nd lender in eight days to unveil a one-year variable-rate product. (Street Capital launched its on January 20.)
Armando Diseri, Home Trust’s VP of Mortgage Lending for its Accelerator Products, says: “We noticed that there has been an increased demand for shorter-term mortgages because some people think that rates have not bottomed out.”
“In order to satisfy this demand and give our brokers and consumers more options, we felt introducing the 1- and 3-year Variable Rate Mortgage was the sensible thing to do.”
One-year terms offer variable-rate fans the chance to renew into potentially fatter variable-rate discounts in one year, as opposed to waiting to renew a 3- to 5-year term.
Of course, if you plan to convert your new variable mortgage to a fixed rate within 11 months (you can do that at no cost), then a lower variable rate and better conversion rate are more important than the term you pick.
For those familiar with Home’s products, its new 1-year term has the same features and guidelines as its 5-year variable, with one exception. Unlike Street Capital, Home Trust passes the default insurance premium through to borrowers on its conventional one-year variable. These premiums range from 0.50% to 1.00% of the principle amount, depending on loan-to-value.
Home Trust and Street Capital have other important differences too, like rate structure, pre-payment policies, and broker incentives. Talk to a mortgage planner if you’re curious about them.