Analysts are predicting another rate increase to the prime rate on April 13, 2022, with a few more to follow in the remainder of the year. Many variable rate mortgage holders have concerns, asking if they should lock in or take a fixed rate on a new mortgage.

If you are shopping for a mortgage or are currently in a variable rate mortgage term, there are many reasons why staying with a variable rate may benefit you.  Below are a few reasons why.

Benefits of Variable Rate Mortgages

• Variable rates are currently about 2 -2.50% lower than fixed rates
• If the prime rate changes, it will increase at a slower pace than just jumping to the current fixed rate
• Paying lower rates will save you thousands of dollars in interest
• Variable rates have the lowest penalty if you need to make changes to your mortgage during your term

Let’s Break Down the Numbers

This can be overwhelming for homeowners, so we’ve provided some examples below to help give you a better understanding.  The below figures are based on a current mortgage of $400,000 with a 25-year amortization.

Variable Rate: 1.50% to 1.85% (lender dependent)
Fixed Rate: 3.79% to 4.14%

Payment at a Variable Rate of 1.50% = $1598
Payment at a Fixed Rate of 3.79% = $2058

Penalty to Break a Variable Rate Mortgage = $1500 (always 3 months interest)
Penalty to Break a Fixed Rate Mortgage = $26,080 With 2 Years Remaining

These numbers are just estimates to give you an idea of what a variable rate mortgage and fixed rate mortgage could look like.

If you have questions about your specific situation, please reach out and let us know. We’re happy to review your current mortgage term and let you know what the best options are for your unique needs.