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Sarah Hampson's Currency

Size matters when you're a rate-o-phile Add to ...

Chad, over there by the fireplace, is talking about his size.

Well, his name is not really Chad, but he looks like it should be with his clean-cut soap-opera looks, that small cleft in his chin, perfect stubble, hair swept back, chinos, and the way he is leaning on the mantel, so proud of himself, boasting.

The other men in the small group are leaning in.

"Really?" says Kevin, another thirtysomething, clean-shaven in jeans and sweater.

"No kidding," Chad says, taking a swig of his beer.

"Wow." Stunned pause.

"How'd that happen?" one asks.

Chad straightens his posture, says nothing. Peacock-ish he is, as he allows a small, self-satisfied smile.

"Mine is big," moans Kevin, shaking his head. "My wife hates it."

He looks at Chad with admiration. "I'm jealous, man."

"What's yours, then?"

Kevin hesitates to say, but then relents: "5.05 per cent, fixed rate for five years, 25-year am. I locked in."

"No."

"Yes," Kevin replies sadly. "We bought 21/2 years ago. Boom time, you know. Before the Great Recession." He bugs his eyes. "But what can you do? We were worried the rates would go up. Didn't want to deal with the stress."

The men nod in solemn sympathy.

"Mine is 3.69," another offers.

"Ha! Mine is 3.49," says another. The two discuss the point difference between them, Mr. 3.69 needing desperately to know how Mr. 3.49 scored a marginally better deal.

Chad, meanwhile, is still basking in the glow of his situation, which he refuses to acknowledge as simple, dumb luck.

"What did you say yours was again?" someone asks him.

"Prime minus. Variable."

He says it in the way one might mention the kind of car he drives.

"Tiny," he adds, wiggling his eyebrows for emphasis, holding his forefinger and thumb up to indicate a mere inch. "Sandra is very pleased."

The men (yes, marginally fictitious) know what they're doing. They are self-aware urban dwellers, after all. Some even have a name for it: rate-o-philia.

Or, mortgage-mania. Go with a blend and extend? Variable? Fixed? Five-year term? Ten-year? Twenty-five-year amortization versus 35 years? Pre-payment privileges? Total debt service ratio of 20 per cent of gross monthly income? Thirty per cent? Forty?

Think of it as the Kama Sutra of mortgage options. Whatever you choose puts you in a certain financial position, not always comfortable.

It's an activity happening in living rooms everywhere, up there in the first condo, over there in the trendy, first-home neighbourhood, and in the pray-it-will-gentrify urban pockets, too.

Who wouldn't obsess about rates in the roller-coaster economy of the last two years? Anticipating what it will do is like parenting a teenager. You think you know her. But really you do not. She can fool you. And you watch for signs of impending behavioural shifts. The Reserve Bank of Australia surprised markets by hiking interest rates last week. Will the Bank of Canada follow suit?

The rate-o-philes know it's a phase of life. "When you're 25 to 28, the talk is about who is dating whom, who's hooking up, and which relationships are the real thing, which are going to be more permanent," explains James, a 32-year-old Toronto lawyer.

"Next, it's where you are living, and after that it's mortgage rates and whether you're locked in or not." (He isn't, though he is romantically: living in a house bought with his girlfriend.)

He and his friends don't talk about how big their mortgage debt is. It's all about the rate.

Chalk it up to the post-euphoria of buying a house. (The urge to own harks back to the 18th century, if it makes you feel any better. That's when the home became a "place for personal intimate behaviour" as opposed to the large medieval structure in which everyone and their cow took up residence, according to Witold Rybczynski in his book Home, A Short History of an Idea.)

It felt so perfect, so right, when you walked in the front door the first time, immediately thinking of how great it would look with cork tiles and pale green walls.

Home ownership is also a powerful rite of passage. "When you have a mortgage, you're grown up," says James. "Getting married doesn't require a third party deciding that you've got it together to have one." But then the commitment hits you. The honeymoon is over, so to speak.

In the Acquisition Years, you gain a partner, a house, a mortgage, in-laws, maybe a baby or two, and a new kind of angst. All that rate sharing, boasting and moaning is group therapy for thirtysomethings.

So don't tell Chad in his chinos that he shouldn't feel like a star. Don't tell him what many mortgage brokers say: that the rate really isn't that important, that it's better to focus on what they call "life occurrences" such as children, job loss, and how to plan for them.

Look, he feels so good. Aw, here comes Sandra with a smile. After all, the Acquisition Years last for a while - 20 years even - and then the De-acquisition Years begin, with the departure of grown-up children, the downsizing, even the shedding of spouses.

But, shhh, don't tell him that now.

Follow on Twitter: @Hampsonwrites

 

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