Christmas ‘rate sale’ in progress
All right, it’s not exactly a fire sale, but we are indeed getting some Yuletide rate relief.
Since the peak one month ago, the lowest nationally advertised five-year fixed has dropped 30 bps to 5.14 per cent (uninsured). On a standard mortgage, that saves $1,445 of interest over five years, per $100,000 borrowed.
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Compared with the lowest uninsured variable at 5.90 per cent, a 5.14 per cent five-year fixed might not seem so bad. But it’s literally the fourth-worst term you could take if you’re well qualified and risk tolerant.
The worst, second-worst and third-worst terms are the 10-year, seven-year and six-year fixed, respectively. That’s true for two reasons. For one, history shows they perform miserably after mortgage rates shoot this much above their long-term average – relative to shorter and variable terms, that is. For another, owing to how fixed-rate prepayment charges are calculated, any fixed term over five years usually entails considerable penalty risk.
The closer we get to recession; the more fixed rates will drop. But don’t be surprised if we see another rate pop before that happens. Temporary reinflation remains a risk – one the Bank of Canada would react “aggressively” to, according to Mr. Macklem. While I don’t expect it, the market is notorious for disappointing borrowers – right when they think they’re out of the woods.
Rates in the accompanying table are as of Thursday from providers that advertise rates online and lend in at least nine provinces. Insured rates apply to those buying with less than a 20-per-cent down payment, or those switching a pre-existing insured mortgage to a new lender. Uninsured rates apply to refinances and purchases over $1-million and may include applicable lender rate premiums. For providers whose rates vary by province, their highest rate is shown.
Robert McLister is an interest rate analyst, mortgage strategist and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.