Mortgage Terms: Stars & Dogs

champion dogAfter “What is your best rate?” the next most popular mortgage question is probably “Which term do you recommend?” — or a variation thereof.

But it’s tough to generalize about the best mortgage because borrowers have unique needs. To get around that, we have to use limiting assumptions and make a best guess at the risk/reward of each term. And that’s how we’ve picked the stars and dogs in this week’s Globe column.


Not the Time for a 10-year Fixed

2024-Ten-year-fixed-mortgage-maturityOK let’s rephrase that. It’s not the time for a 10-year fixed for well over 90% of Canadian mortgagors.

There was a time last year when the spread between 10-year and 5-year fixed rates was below 3/4 of a percentage point. That made even the 10-year scoffers among us rethink our positions. But spreads are now back over 1%. That means 10-year terms simply aren’t worth the interest premium anymore (for all except the most payment sensitive borrowers).


Mortgage Term Review – January 2012

Term-AnalysisIt’s been quite a stretch since CMT’s last term analysis. Given the slew of precedent-setting rate changes lately, it’s high time we run another one.

For those in solitary confinement last week, the big news was BMO’s 2.99% 5-year Low-Rate Mortgage. It made every major newspaper and newscast in the country. Even the CEO of competitor ING Direct, Peter Aceto, found it compelling. He told the Toronto Star:

If you’re satisfied with everything else, take it, because 2.99 for 5-year money is a great rate…I had some of the people here look into it, and it’s definitely the lowest they’ve been able to find for as far back as it’s been tracked.

(Aceto went on to suggest that 2.99% was “unsustainable” from a profitability standpoint.)

In any event, say what you will about the limitations of BMO’s product (and there are many), but it sure did push down rates industry-wide. Here’s a look at how the recent rate changes impact mortgage terms: