Top graph above – black line shows anticipated Prime Rate reductions until 2027!
- Take advantage of this now and save with the variable rate at Prime – o.9%, Big-6 banks are at P – o.3%%
2nd graph shows 5-year fixed has not been this high since 2008 – that’s a 15 year high. Don’t lock in to it for 5 more years!
Summary
- Variable rates are lower than the 1, 2, 3, and 4-year fixed options today
- Variable should beat the 5-year fixed rate before the end of 2024.
- The black line in the chart above shows is the most accurate of 3 models showing future reductions to Prime.
- Fixed rates are staying higher longer due to a hot US economy and bonds doing crazy things.
Take action now and get a REAL Pre-Approval with 4-month-rate-hold at today’s best rates – To start a PRE-APPROVAL, click here
Short Version:
- Post-Covid inflation has caused 5-year fixed rates to go from 4% (before Covid), down below 2% (during Covid), and hopefully topping out at about 5.9% today – their highest since 2008.
- Variable Rates are recommended again now that the economic recovery “cards are on the table” and we can do solid projections with expected rate reduction dates and amounts.
Strategy
Take the Variable Rate now; it starts LOWER than the 1, 2, 3 & 4 year fixed rates today.
Prime is expected to start to come down in July, and after only 2 reductions, your rate should be BELOW the current 5-year.
(Taking the current 5- year is locking in the highest 5-year rates since 2008.)
Then … continue to stay in the Variable and reap the benefits of the lower rates, or lock-in, at what the rates are for the day you lock in at. Both get you lower rates than either the 3 or 5 year fixed today.
Math
It will only take 2 reductions to Prime – expected to start in July 2024) to get the rate below the 5-year fixed rate today.
- Variable at 6.3% today (for less than 20% down payment)
- Assume Prime does not increase and the 1st Prime Rate reduction arrives July 24th, 2024, and then 1 reduction, by o.25%, every 3-months thereafter.
- IF Prime does go up 1 time in 2023 (economists are betting there is a 50/50 chance it will go up 1-time or not at all) then this math IS still valid and it just takes 1 more rate reduction to be the same.)
Expected Forecast of Variable Rate Decreases and When the Variable will Beat Current Fixed Rates …
| Date |
Prime Rate |
Expected 5-Year Variable Rate after Reductions |
Comment |
| November 2023 |
7.20 |
7.20% – o.9% = 6.30% |
Variable rate TODAY
Lower than 1, 2, 3 and 4 year fixed. |
July 24, 2024
(1st rate-cut expected) |
6.95 |
6.95% – o.9% = 6.05% |
|
Oct 23, 2024
(2nd cut expected) |
6.70 |
6.70 – o.9% = 5.80% |
Variable rate is now lower than today’s 5-year fixed rate of about ~5.84% |
| Jan 24th, 2025 |
6.45 |
6.45 – o.9% = 5.55% |
Variable rate well below all current fixed rates on the 3rd reduction to Prime |
| April 10, 2025 |
5.55 |
5.55% – o.9% = 5.30% |
|
| July 24, 2025 |
5.30 |
5.30 – o.9% = 5.05% |
S A V I N G S !! |
Mechanics & Details
- 6.49% = 3-year fixed rates for INSURED, or less than 20% down payment purchases, today.
- 5.84% = 5-year fixed rates for INSURED mortgages, today.
- Variable (< 20% down) is at Prime – o.9%, Prime is 7.2%; 7.2% – o.9% = 6.3%
- Prime usually changes o.25% at a time.
- There is a 50% chance of 1x .25% rate increase to Prime by the end of 2023.
- 1st Prime rate reduction is expected in July, 2024.
- That means Prime reductions are expected to start in/ around July 2024 at o.25% each.
- THE KEY: Prime -o.9% is broker rates, Big-6 banks are at P-o.3% or P-o.4%; this leverages the massive ½ % – yes o.5% variable rate difference – between Broker rates and Big-6 rates.
- CONVENTIONAL or 20% or more down – Variable rate is P – o.6%: still better than Big-6 at Prime – o.3%
Detailed Canadian Economic Data is here
No matter what the Bank of Canada does or doesn’t do, we will:
- Continue to answer the phone in the 1st ring from 9-9
- Support Lo/No Condition offers with Pre-underwritten, Pre-approvals that actually work.
- Start a 120 day rate hold for you, from the exact day the next rate increases happen – we do time the bottom of the market for you.
- To start a PRE-APPROVAL, click here
We welcome the opportunity to prove it in the weeks ahead. |
