So the TD bank and RBC announced this week an increase in all thier long term rates (in Canada long term is defined as 5 years)  due to increase in Bond Rates. This jumped the Bank of Canada who has held off. Interesting that this has caused the Canadian dollar to jump 1 1/2 cents this week to 99 cents us. The question is will the Bank of Canada still raise rates as this rise in dollar hurts the manufactoring center, especially Ontario, where we know all decisions are made and done for rather than rest of Canada

 

So lock in or stay Variable is the number one question I get.

The question is do you like to sleep at night or not?

Actually for some folks that is the question. Variable rates are at historic lows. Even with the change in rates the banks are still competitive. I remember on some of my mortgages I have or had prime minus .75 to 1%. Then when meltdown happened it changed to prime plus .75 to 1% (that reminds me its time to redo some mortgages I have!). The rates are still in the 3% range. Great rates. 5 year rates are at 5.5 to 5.8 now. Still good.

If you plan on staying for a while and are in a job that pays you a set amount and want stability then lock in. If you want to keep paying down your principal and get free from mortgage then go with variable. Over time Variable rate mortgages have been the way to save money. Unlike the USA with their adjustable ARMS etc we are in a much better position. My recommendation is to take the 5 year rate, figure out what mortgage payments would be, then make that payment on and adjustable or variable rate mortgage. That way you can live with higher payments at the same time having lower interest rates and thus paying down your mortgage. That's the goal for all Canadians. Unlike in USA we can't deduct interest so Canadians work hard to have no mortgage. Right now with low rates its debt reduction first, even if it means delaying the new boat or car until later.

If you want a great book to read about debt and mortgages check out Robert Kiyosaki's rich dad series. Start with Rich Dad, Poor Dad then read Cashflow QUadrant. Made a difference in my life.