To lock in or not to lock in (your mortgage rate)

Everyone has been asking us the same 2 questions:
Should I lock in my variable rate mortgage yet? (short answer - no)
Should I break my 5 year fixed mortgage to lock in a better rate? (short answer - maybe)

As many of you know, mortgage rates have been moving down swiftly in the last few weeks.
In fact, our best 5 year rate was 5.59% on November 20 and is now, 9 weeks later, 4.39%. That is more than just a subtle drop. That is actually an indication the world markets are falling apart.

The recent rate drops were preceded by a series of prime rate reductions, and, just as importantly, the willingness of the federal government to purchase Canadian mortgage pools. I am not referring to the junk mortgage pools available in the US. Just to be clear, these are well performing mortgage pools. In fact, it is well assumed that these are profitable transactions for the federal government.

By buying these mortgage pools from Canadian's big banks, they are essentially freeing up a lot of Bank capital for lending. More lending means lower mortgage rates.
In the federal budget recently announced, the Government promised another $50 billion for mortgage pool purchases. That is a significant amount of dollars and will likely move interest rates further down.

We have come up with a few ?rules of thumb? that should make your decision making easier.

If you have a rate of 5.2% or higher and want our 3 year rate at 3.75%, it will take less than 12 months to recoup the cost of your penalty.

If you have a rate of 5.9% or higher and want our 5 year rate of 4.39%, it will take less than 12 months to recoup the cost of your penalty.

If you would like to discuss your specific file with us, please give us a call.