5 year Locked in mortgages on the upward move-timing?

[Rybo123]

Hi there,
Been lurking on rein for a few years now, first official post. Anyways I have a few rentals in Calgary. And like most with variable rates we have done very well. I have been doing some research into things with regard to inflation, Bond rates and Locked in mortgages. The last day or two 5 year rates have moved up around .25%. Most likely to do with the benchmark 10-year U.S. Treasury bond yield jumping to a 6 month high last week and the spread between the 2-year and 10-year bond yields widening to a record 2.75 percentage points. This could be the start of the market pricing in inflation.

We know Canada is tied to the US and with the US printing money like Mad, inflation is inevitable, but how bad is the question. Will we see 18%? Who knows, it happend once and I was 6 years old so do not really get it, but I think yes we could see it again. ( I have read most of the posts relating to this on here as well)

So are others watching? Are others going to take advantage and lock in to keep there monthly cashflow reasonable? It would be hurtful but cash is still King and so is cashflow. You could assume the prime rate not to change too drastically near term but when it gets to a point to lock in, interest rates could be up there...

What are some of the members stratgeies with regard to Mortgage rates etc?

 

[EdRenkema]

QUOTE (Rybo123 @ Jun 3 2009, 07:28 AM) Hi there,
Been lurking on rein for a few years now, first official post. Anyways I have a few rentals in Calgary. And like most with variable rates we have done very well. I have been doing some research into things with regard to inflation, Bond rates and Locked in mortgages. The last day or two 5 year rates have moved up around .25%. Most likely to do with the benchmark 10-year U.S. Treasury bond yield jumping to a 6 month high last week and the spread between the 2-year and 10-year bond yields widening to a record 2.75 percentage points. This could be the start of the market pricing in inflation.

We know Canada is tied to the US and with the US printing money like Mad, inflation is inevitable, but how bad is the question. Will we see 18%? Who knows, it happend once and I was 6 years old so do not really get it, but I think yes we could see it again. ( I have read most of the posts relating to this on here as well)

So are others watching? Are others going to take advantage and lock in to keep there monthly cashflow reasonable? It would be hurtful but cash is still King and so is cashflow. You could assume the prime rate not to change too drastically near term but when it gets to a point to lock in interest rates could be up there...

What are some of the members stratgeies wit hreagrd to Mortgage rates etc?


I have 4 properties I`ve bought with my own cash/HELOC and am riding them all variable (ranging from prime -.5 to -.8). My most recent purchase was with an investor and I closed with a variable rate at prime + .8. Yesterday I signed the papers to lock in the 5 yr rate at 3.95. My payment now increased approximately $60 per month, the unit still cashflows nicely and I have peace of mind for my investor`s (and mine) investment.
In 5 years I will either refinance or sell as I am in an excellent location with strong growth and infrastructure developement.

 

[invst4profit]

Unfortunately my mortgage is already locked in at a very high rate through a VTB.
My personal choice would be to have a variable and I would not be locking it in simply due to rising rates.
I personally am not fearful that rates will be steeply rising in the foreseeable future.

 

[mortgageman]

My .02 is that fixed rates aren`t going to go up in a straight line. They`ll go up a bit then they may come down a bit and then go up a bit more.
In the meantime, consider how far your variable rates need to rise to equal current fixed rates. Also consider what locking in will do to your cash flow. If you`re satisfied with your portfolio`s cash flow based on current fixed rates and the insurance of the fixed rates makes you feel better, then lock in.
All the best,
Jason

 

[nepoez]

I know that banks are not offering prime minus today because rates are so low. However if you keep your variable rate now which is prime minus, when 5 years is up and it`s time to renew, and rates have indeed gone up in 5 year I`m guessing the banks would be offering prime minus again. Totally speculating here

QUOTE (Rybo123 @ Jun 3 2009, 07:28 AM) Hi there,
Been lurking on rein for a few years now, first official post. Anyways I have a few rentals in Calgary. And like most with variable rates we have done very well. I have been doing some research into things with regard to inflation, Bond rates and Locked in mortgages. The last day or two 5 year rates have moved up around .25%. Most likely to do with the benchmark 10-year U.S. Treasury bond yield jumping to a 6 month high last week and the spread between the 2-year and 10-year bond yields widening to a record 2.75 percentage points. This could be the start of the market pricing in inflation.

We know Canada is tied to the US and with the US printing money like Mad, inflation is inevitable, but how bad is the question. Will we see 18%? Who knows, it happend once and I was 6 years old so do not really get it, but I think yes we could see it again. ( I have read most of the posts relating to this on here as well)

So are others watching? Are others going to take advantage and lock in to keep there monthly cashflow reasonable? It would be hurtful but cash is still King and so is cashflow. You could assume the prime rate not to change too drastically near term but when it gets to a point to lock in, interest rates could be up there...

What are some of the members stratgeies with regard to Mortgage rates etc?

 

[JulieHoffman]

HI there.

I think about rates often. Most of my stuff is at prime or just about in LOC or variable mortgages. I am going to keep waiting because it makes sense for me at this time.

But if you can still make it cash flow and lock in and sleep a little better at night- then maybe there is your answer.

I just don`t see rates going up until maybe next spring based on the economy. There is just way too much need for low rates right now and for the near future.

All the best!