VARIABLE VS FIXED – What’s the Scoop!
Dr. Moshe Milevsky of York University has done some extensive research on Fixed vs Variable Rate Mortgages. The key points of his recently written article are as follows:
- Based on data from 1950 to 2007, the average Canadian could expect to save interest of 90.1% of the time by choosing a variable-rate mortgage instead of a fixed. The average savings was $ 20 630 over 15 years per $100 000 borrowed.
- Variable mortgage typically let people shave over a year off their amortization.
- Always keep in mind that there is not a ‘one-size-fits-all solution’ to choosing a fixed or variable rate. Dr. Milevsky feels it depends on one’s risk tolerance
- Although rates are virtually impossible to predict, the premium of fixed rates over variable rates has declined about 7% in the last seven years
Milevsky’s Mortgage research is said to be the best out there. He has shown time and again that regardless of what rates do in 1 – 2 year periods you are better off in a variable IF you can handle the payment risk of periodic increases and decreases to the actual amount paid to the lender, as the prime rate fluctuates.
For more information and to read the published article please visit: