Fixed vs. Variable Rates: the debate

Since late in 2008, the Canadian Mortgage Lending market has been experiencing a dramatic period of change. From fluctuations in interest rates to the emergence and disappearance of home financing products, the past 24 months have provided potential and existing home owners with a wide range of opportunities and challenges. Now, as the markets begin to settle, a new debate has emerged for the Canadian Home Owner: Fixed vs. Variable. Over the course of the coming weeks, we will discuss some of the potential benefits and challenges associated with both Fixed and Variable rate mortgages. We'll start of with Fixed Rate Mortgages.

5 year fixed rate mortgage have continued their downward trend through the first 2 weeks of December. Many are expecting to see even further decreases in rates over the course of the coming winter months, as buyer activity shrinks in the face of subzero temperatures, and a general post holidays slump in real estate activity. Fixed rate mortgage interest rates remain at or near historical average lows, and provide an excellent opportunity for existing and potential home owners to secure a great interest rate for the next 3 - 5 years. By taking advantage of a historically low mortgage interest rate, home owners can have peace of mind knowing that at least one component of their home ownership cost will be a constant for the near future.

However, while security is always great, variable rate mortgages are once again becoming increasingly attractive. As Canadian mortgage lenders become more confident in the market, and credit becomes more abundant, look for even more attractive Variable Rate Mortgage products to come out. In fact, over the past 12 months we've seen a tremendous shift in Variable Rate products --from Prime + 1.25% earlier this year, to now Prime - 0.25%! With Prime currently sitting at 2.25%, home owners can take advantage of as low as a 2.00% interest rate, and significantly increase their interest savings.

The debate will continue with next week's blog post, but for more information in the meantime call one of the qualified Mortgage Associates at Alberta Mortgage at 780-479-2222 or visit http://www.albertamortgagecentre.com.