Thursday, October 27, 2005

Interest Rates on the Rise

I chatted with my personal banker today. He is with one major Canadian banks who have an online branch. The reason for our chat is that I have a variable rate mortgage. This means that as interest rates rise, so does my interest rate. While this may be a great idea while interest rates are dropping, it is not necessarily a good idea to stay with it as they start to rise.  

My personal banker while “looking into his crystal  ball” says that he predicts that my now low rate of 4.375% is expected to rise to around 5.5% within 6 months. While I think this is a bit strong for an increase within that time period, I do think rates are on the rise and will be for some time.

The result of our conversation is that I locked in a rate of 4.296% for 4 years. Time will tell if I did the right thing or if my advice to you to lock in for 3-5 years is trustworthy or not, but I think it is.

If you have a variable rate mortgage, call your bank and have the discussion. Ask if your mortgage can be locked in. Many can with no charge at all to you.

Hope this helps,

Lorne