Paul Meredith
New Member
You are right, there is a certain risk involved with variable. If you are risk adverse, it may be better to go with fixed. An additional question to ask you self when deciding, has the US\Canada economy recovered such that rates will increase?
Over the last 6-7 years with a spread of less than 1%, anyone who has gone variable would be on top of those who had gone fixed. There is a reason banks only let you switch from variable to fixed and NEVER the reverse. I cannot stress this point enough.
In the end it depends on comfort level. Right now getting a mortgage with these historically low rates you can borrow large sums of money for as close to nothing as you'll ever get. Rates only have one way to go right now, its just a matter of when...
Can tell me where you read this study? There was a time a few years ago when variable was actually higher than fixed rates for a short time. Quite unlikely anyone on variable would have benefited.
Will you benefit from a variable now? No one can say that for sure. What we do know is that prime rate has remained unchanged since September 2010. How likely do you think that we will go another 4-5 years without any increases? Maybe we will. Maybe we won't. I would say odds are better that we won't...but just like anyone else, all I can do is guess. The whole point is that variable is risker now than it has been in the past when the spread was between 1-2%. Anyone taking variable... you are taking a pretty big risk.
As mentioned previously, a 2.49% 3 year fixed rate vs. a 2.30% variable is only 0.19% difference. There is just no cushion to protect the borrower should rates increase.