“Economists don’t get burned…if they’re wrong.”
—TD Macro Strategist, David Tulk
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Good thing, because they were “a little off” once again.
The latest Bloomberg economist survey shows the economic establishment now forecasting a 75 bps bump in the overnight rate by the end of 2012. That’s half the increase that economists predicted last month.
Economists’ median rate estimates now imply a 3.75% prime rate by the end of next year, followed by 100 bps of more tightening in 2013.
A separate survey from Reuters shows analysts expecting the BoC’s rate hike campaign to resume in Q2 2012. (That’s been pushed back from their Q4 2011 prediction a month ago.)
If you’re buying into these forecasts and you don’t plan to pay off your mortgage anytime soon, a 4-year fixed near 3% still reigns supreme. It continues to have the lowest hypothetical cost of any term in our rate simulations.ǂ
The lenders with the best nationally available deals on 4-year terms are currently Street Capital, Canadiana Financial and RBC.
ǂ Said simulations compare all terms and series of terms over a set five year period. They are based on the lowest available rates for each term, historical rate spreads (for estimating renewal rates), and the aforementioned economic forecasts. It is assumed that the 4-year fixed borrower will renew into either a 1-year fixed or a variable rate at maturity. All forecasts are subject to revision and random error. This is not a recommendation as your needs may vary. Speak with a professional mortgage advisor for advice suitable for your circumstances.
Rob McLister, CMT
I’m really conflicted- we were quoted prime-.55 or 4 year fixed at 3.19. We like the up front savings since this is our first home purchase but if we’ll be paying more by next year, not sure it’s worth it. Anyone with a crystal ball have suggestions?
I checked with RBC last week and they are giving 2.99 for 4 years Fixed.
Rates could easily rise over 1% in the next few years. To me it makes no sense to take a variable if all you’re going to save is .54%-.74%.
Like Jo…
The crystal ball is needed!!! I am tranferring mortgage the hit is worth the change…we are undecided the lion branch says prime ninus .65 but we’re not sure if its gonna be worth it over the 7 years left on our mortgage.
Why Do not you get for 3 year fixed at 2.65%.
Jyothiprabha
I would suggest go for three year lowest rate deal, gime me email and I can send u all information
Hi Jyotiprabha, I can give u much better rate than 2.65
SOOOOOOO for anyone looking for a 4 year fixed..!!!!! I just signed with street capital at 2.94% with a 35 year ammortization with 20/20 prepayment options and NNOOOOO colateral mortgage. If you want a good rate, do your own research (online) and find one. I put 20% down and the mortgage is for $550,000 for more details. Calgary alberta. LOOK AROUND FIND A GOOD broker and make them work for you.
Joseph
read my post below… 2.94% 4 year fixed…
Hi,
What kind of lowest rate can you give for 3 years (fixed) for $280,000?
“If anything, markets expect the Bank of Canada could well lower rates in the next few months.
“A quarter-point cut is already nerly priced-in for January,” observed BMO Capital Markets senior economist Michael Gregory. ”
Joseph,
Rates are not going anywhere any time soon, so why lock in for a longer fix period? Brokers (my understanding) don’t advise going for say a one fixed because the commission is very low.
If you have followed this site for awhile at the very least split the mortgage 50% variable and 50% fixed. If you want to save even more money than the fixed rate you just signed.
The fact rates are not going anywhere should concern people who understand that low rates is what is keeping real estate as high as it is.
Hi Brian,
Thanks for the post. I’d respectfully disagree that mortgage professionals generally avoid 1-year terms for the reason stated. Here’s why.
With volume bonus, 1-year fixed compensation is typically 60-75% of 5-year terms. That’s not bad. Moreover, you get another crack at a commission when the client comes up for renewal in 12 months (instead of waiting five years).
So on those grounds alone, there’s less chance that broker self-interest will come into play.
More importantly, good mortgage professionals analyze projected term cost. They try to recommend whichever term has the lowest potential cost and is the best fit for the client’s objectives. In many cases, 1-year terms are clearly most appropriate.
The biggest reasons bankers and brokers don’t recommend 1-year terms (in my view anyways) are threefold:
1) Some don’t understand the math and historical track record of 1-year terms. So they’re uncomfortable selling them.
2) Pricing on one-year terms is sometimes noncompetitive (as is the case today).
3) High-ratio borrowers often can’t qualify for 1-year terms due to government guidelines.
Cheers…