Comparison of Fixed and Variable Rates

[BrianPersaud]

Hey Fellow REIN members

just thinking out loud on the first line mortgage graph from last night (If someone finds the graph please post the link). The graph eloquently illustrated that variable almost always beats out fixed rates.

I`m curious about how accurately the graph actually shows what`s really going on.

I haven`t seen to many mortgages where people pay posted fixed rate...there is always a discounted fixed rate (say 1% at least?)

In the Graph from firstline, there were many periods were the fixed rates were very close to the variable rate, if people where getting a discounted fixed rate, that would put the fixed rate below the variable rate more than people would think throughout the last 25 years.


Is there any data that can accurately show the true picture in the debate against going variable over fixed?

 

[Thomas Beyer]

QUOTE (BrianPersaud @ Oct 30 2009, 04:39 PM)
...The graph eloquently illustrated that variable almost always beats out fixed rates. ..


fixed rate mortgage is like insurance. ON AVERAGE you always loose !



Insure only what you cannot afford to loose !



Thus, on average, a variable rate is ALWAYS ALWAYS cheaper as the banks do not know either where rates will be in 3 or 5 years .. thus they have to offer a higher average 5 year rate to allow for the possible rate spike in 4 years ! .. yes there will be a year or 2 where a variable rate is above a 5 year fixed rate, but over a 5 year average or 10 year it will always be more expensive to lock in !



Related post on 50 year bond rates: http://myreinspace.com/rein_members_only/Members-Only_Discussion/81-9705-50_Year_View_on_Interest_Rates_in_Canada.html