Monday, March 19, 2012

Is it time to lock in your mortgage rate?

I was asked by Harry

"Hi Mark,

Hope all is well.

I have been on variable rate since I spoke with you last. I have an opportunity to lock in my mortgages at 2.99% for 4 years. Is it a wise move under today's conditions?

Thanks in advance.

Hello Harry,

Yes, I saw this rate and blogged about it last week! Not sure if you saw it or not:

Long term mortgage rates

It's a judgment call on your part, there are some severe restrictions that you must be aware of. There are discounts on these 'posted' rates, so ask for a discount.

We may find that the variable rates drop again to prime minus, maybe they will go to prime minus .9% again and that's 2.1% and you may regret the 2.99%

Funny thing is, when rates were 10 to 14% for about 15 years in the late 80's to early 2000's you would have jumped at 2.99% and thought you won the lottery.

Our mortgages are all variable, prime minus, so I'm still staying where we are for at least the next 6 to 12 months or most likely longer.

Again, it's how much risk you are willing to take.

I wish you the best and let me know what you decide!


  1. It would be no brainer to lock in the rate, that way you know for sure what you are paying every month for the next four years. Like Ben Bernanke once said that he likes certainty. Variable rates are not for regular people, they are in my opinion for hedge funds. Regular people have no idea how to manage interest rate risk. Variable rates work well in a decreasing rate environment, but we know very well at some point central banks will need to increase interest rates, especially when the 10 trillion stuck in the bond market starts to move into risker assets.

  2. Hello Arb,
    Thanks for your comments.

    We could be near the point where the short term variable interest rates flip and locking into a longer term mortgage may be the best choice.

    It should be very interesting to see what happends over the next 1 to 2 years with rates, stay tuned!