Even with fixed mortgage rates lower than variable ones, locking isn’t a slam dunk

Normally, switching from a variable rate to a fixed one before the end of your mortgage term means signing up for a higher rate. Fixed mortgage rates are usually higher than variable rates because people are willing to pay extra for the comfort of knowing their interest rate will not change.

For months, though, fixed mortgage rates have dipped below variable rates, a rare occurrence that reflects investors’ worries about the possibility of a future recession in the U.S. and Canada.

For example, the lowest nationally available five-year fixed rate for a conventional mortgage currently is 2.79 per cent, according to Robert McLister, founder of rates-comparison site RateSpy.com. The lowest variable rate for a five-year term is 2.89 per cent.

This means variable rate holders with a five-year mortgage term can lock into a five-year fixed rate that is lower than their current rate. And what’s better than getting a better rate and the peace of mind of a fixed mortgage payment?

Not so fast, some mortgage brokers say. Locking into a lower rate won’t necessarily save you money.

Source: Read Full Article