The discounts on variable rates have been progressively getting deeper over the past year or so, although the movement has been slow. You can now get a 5 year variable for as low as prime -0.65% (2.35%) with full 20% prepayment privileges. Since the prime rate isn't expected to change for at least another year (although anything can happen), you may want to consider a variable rate, but set your payments as if the rate were fixed. The extra payment toward your mortgage will go 100% towards your principal, significantly accelerating the pay off of your mortgage.
The 5 year fixed special has dropped all the way back down to 3.19% for closings within 30 days, although prepayment privileges are only 5%. Remember though, 5% on a $300,000 mortgage is still $15,000 per year. If you don't plan on prepayment anywhere near that, then it doesn't make sense to pay a higher rate just for the privilege.
The bond yields have been falling since the start of the year (fixed mortgage rates are dictated by bond yields) but now seemed to have levelled off. There is still room for more fixed rate drops with the yields at current levels and if they stay this way for any length of time, then we will most likely see some lower rates. If they start to trend down again, they will will almost definitely see some drops to fixed mortgage rates as well.
_________________ Paul Meredith Mortgage Broker CityCan Financial (est 1976) 416-409-8009 http://www.easy123mortgage.capaulm@citycan.comLic#10532 Follow me on Twitter! http://www.twitter.com/paulmeredith
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