Don't call it a comeback...

The Return of the Variable Rate

By Jim on Sep 10, 2013

....ok, go ahead and call it a comeback. Unlike LL Cool J the Variable Rate has not "been here for years". Back in 2010 we started to see bond yields plummett resulting in fixed rate mortgages following suit. At the same time we saw a drastic cut in Variable Rate discounts which was a heavily favoured product for many borrowers in previous years with discounts dipping as low as 1% below prime. With 5yr discounted fixed rates dropping below 3% and Variable trading at Prime Even it is easy to see why no one was lining up to float! Why assume any kind of variable risk when you could fix for 5yrs below the active rate?

After almost 3 years of collecting dust on lender's shelves, the Variable Rate mortgage is starting to see a resurrgence after a beefy 80bps increase in 5yr fixed terms over the past 3 months! In comparison some providers are offering the option to float at as much as 0.5% below Prime, opening up a gap of over 1% between 5yr fixed and floating options. Layer on the fact that the BOC does not seem to be in any hurry to increase the Benchmark Rate and it just may be the right time to lean towards floating your next term.

What do you think?

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