My career has spanned many interest rates cycles. I recall back in the mid- 80s when rates were double digit, the market was uncertain, and variable rates weren’t especially popular with home owners. Most of my clients back then were signing up for fixed rate mortgages. They wanted to be self-assured and know exactly what their monthly mortgage payments were. Also, there simply wasn’t the awareness of variable rate mortgages in those times.
We all have different levels of comfort when it comes to taking a gamble. Variable rates change over time and thus your mortgage payments also go up and down. This is the gamble, as no one can definitively know how rates are going to move in the future. I have had clients in the past who took out variable rate mortgages on their Mississauga Real Estate, only to be caught when rates unexpectedly went up. (Caught in this situation, variable rate mortgage holders are not in a bargaining position to get the best fixed rate, if they want to switch.)
For people with sufficient monthly cash flow, a change in the prime rate isn’t that worrisome and won’t keep them up at night. So I tell all my clients to seriously evaluate how liquid they are and if they can weather any unexpected rate jumps.
The other variable that needs to be considered when deciding between a fixed and variable rate mortgage is the actual spread between the two rates. When the spread is sufficiently large, the gains from a variable rate are also potentially significant. Conversely, when the spread is small, the pay-off is also minimal.
Thus, as the spread has recently been shrinking, the popularity of fixed rate mortgages with my clients has been increasing. For many years, the spread was in excess of one or two percent, and many of my clients were taking advantage of this difference. Now though, more Mississauga home owners are obtaining fixed rate mortgages.
After 24 years in the Mississauga Real Estate Market, I have developed a checklist to help my clients evaluate which mortgage is right for them. Being immersed in the market for so many years, I have accumulated an excellent understanding of the Mississauga Real Estate Market and the interest rate market. If you are thinking of buying a home and you are wondering which mortgage might be right for you, please contact me at 905-502-1500. I can share with you my thoughts on this important topic that will affect your bottom line.