10 YEAR RATE 3.69% VERY ATTRACTIVE NOW THAT 5 YEAR RATES HAVE INCREASED
The bond market has been very active this week. Rates have been rising almost daily. The increase in rate is due to both the recovery of both Canadian and US economy as well as changes in banking guidelines set out by the Office of the Superintendent of Financial Institutions.
Some economists argue that recovery has been over stated and job creation numbers inflated. If this is the case then rates should remain stable. Whereas, some believe rates are only going one way… up. Although, economists don’t agree on the direction of the rates, they can all agree that 10 year fixed rate is looking very attractive at this point.
5 Year Fixed rates range from 3.34% to 3.59%. The current 10 Year rate is 3.69% (rate sheet attached), borrowers want interest rate predictability, but does a five-year fixed term really give you that much protection? If inflation kicks into high gear and rates start going up quickly, the time remaining on a five-year term runs out pretty fast.The maximum spread of 35 bps (.35%) doesn’t seem to be worth the risk in this unpredictable market. The 10 years rate guarantee means cost certainty for a decade.
Some borrowers are concerned about the payout penalty on such a long term… Actually, after the first five years of any mortgage term, the Interest Rate Act mandates that payout penalties cannot exceed three-months worth of interest due, which is far less than can be charged on a five-year fixed-rate term. Without an onerous payout penalty to keep borrowers locked-in, the 10 year mortgage peaking a lot of interest.
If you have any questions or require any mortgage assistance, I’m a phone call away.
Best Regards,
Chita Rattanarasy
Mortgage Associate
TMG The Mortgage Group Alberta LTD
#10, 156 St.Albert Road, St.Albert, AB, T8N 0P5
