With the overnight rate expected to see its first hike since 2010 in the near future, brokers may take a lesson from one expert who admits he made a mistake when picking his own mortgage.
With the overnight rate expected to see its first hike since 2010 in the near future, brokers may take a lesson from one expert who admits he made a mistake when picking his own mortgage.
Ted Rechtshaffen, speaking to the Financial Post, admitted that in 2009 he switched his variable rate mortgage to a fixed, after heeding warnings that variable rates would be on the rise. And that the move was a mistake.
“I was wrong. I had a variable rate mortgage and in 2009 I pulled the plug and went fixed,” Rechtshaffen, financial planner and president of TriDelta Financial told the Post. “I did mess up, but my question was what benefit do I get locking-in versus going variable?”
The perceived benefit, of course, was that a fixed rate would not have been affected had the overnight rate been hike. However, that benchmark rate has held steady for over four years – which means, had he kept his variable rate mortgage, Rechtshaffen’s mortgage rate would currently be 2.25 per cent today.
Not too shabby.
Still, it’s a decision that many in his position would have made at the time. Rechtshaffen explained that the gap between the five-year fixed and the variable was a mere 25 basis points – which, at the time, was a slight enough gap to warrant opting for the rate security offered by a fixed rate.
Today, however, brokers and mortgage holders are facing the same dilemma; with the overnight rate expected to be on the rise within the next year, will brokers advise clients to favour the security of fixed rates?
After all, according to Rechtshaffen “rates could move very fast once they go up.”
Ted Rechtshaffen, speaking to the Financial Post, admitted that in 2009 he switched his variable rate mortgage to a fixed, after heeding warnings that variable rates would be on the rise. And that the move was a mistake.
“I was wrong. I had a variable rate mortgage and in 2009 I pulled the plug and went fixed,” Rechtshaffen, financial planner and president of TriDelta Financial told the Post. “I did mess up, but my question was what benefit do I get locking-in versus going variable?”
The perceived benefit, of course, was that a fixed rate would not have been affected had the overnight rate been hike. However, that benchmark rate has held steady for over four years – which means, had he kept his variable rate mortgage, Rechtshaffen’s mortgage rate would currently be 2.25 per cent today.
Not too shabby.
Still, it’s a decision that many in his position would have made at the time. Rechtshaffen explained that the gap between the five-year fixed and the variable was a mere 25 basis points – which, at the time, was a slight enough gap to warrant opting for the rate security offered by a fixed rate.
Today, however, brokers and mortgage holders are facing the same dilemma; with the overnight rate expected to be on the rise within the next year, will brokers advise clients to favour the security of fixed rates?
After all, according to Rechtshaffen “rates could move very fast once they go up.”
