Fixed Vs Variable Getting More Interesting
“Major Banks Starting To Eliminate Variable Mortgage Rate Discounts?”
This week there was an interesting development among two of the big 5 banks in Canada where Royal Bank and Scotia Bank went from advertising their variable mortgage rate at a discount to the prime rate, to posting rates at a slight premium to prime.
This further tightens up the spread between variable mortgage rares and fixed rates, further fueling the debate over whether to be going fixed or variable now and in the near future.
You can find a more detailed discussion on this topic at the following link … http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/12/variable-discounts-turn-to-premiums.html
Over the past number of months, there has been a lot of discussion on forums and different publications on the fact that banks are making considerably more margin on long term fixed rates as compared to the now paper thin margins on the variable rates.
Variable rate pricing issues aside, there would appear to be less profit making opportunities for banks in the capital markets as the world continues to try and pull out of the financial malaise we ourselves in.
And with the ongoing pressure to keep profits up, perhaps pushing consumers more towards the long term fixed mortgage rates is a strategic move on the part of banks to replace revenues down in other areas.
Regardless of whether the change in pricing is driven strictly by increases in costs or an attempt to flip the average mortgage portfolio more towards fixed from variable, the market rates have changed and once again consumers must consider whether they are better off with a variable rate or a fixed rate mortgage, and at what point is the difference in the two worth the risk, especially for home owners on a tight budget.
It will be interesting to see how the other major banks react in the weeks ahead as well as the other major mortgage providers.
If you have rate options available to you, the current trends should be worth paying attention to.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel