Realizing that the instability of the world economy was to continue well into 2012, the bond market recently started to price the Canadian GOC bond at unprecedented lows. Since Canadian Mortgage rates are determined from the GOC Bond, lender took a step back to re evaluate: Offering large discounts (as high as P-.95%) when Prime is 3% and not expected to move up soon, made VRM’s unprofitable for lenders. The discount disappeared quickly. Lenders were also forced to lower their 5 year Fixed Mortgage rates. As a result the spread between the fixed and VRM has narrowed considerably and now the question is; should you go with a Fixed or variable rate? The answer lies if in whether or not you think the “premium” on the fixed is worth the security of knowing your rate is not changing for 5 years.

This article provided by Dominion Lending Centres Licensed Mortgage Agent Robyn Negin. For more information, please visit: www.robynnegin.ca

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