Why I Love My Variable Mortgage!

April 13, 2015|By David Lester

Variable Mortgage For Me!

The bank of Canada will be reporting its decision on interest rates this week.  They will decide if it gets reduced, stays the same, or goes down and for how much. Most experts believe that the bank will keep rates the same BUT decrease it again before the end of the year.  The BOC (Bank of Canada) is managing the national economy and trying to keep our GDP (Gross National Product) chugging at +1.7% a year.  If anything negative happens in the next few months to make it look like we’ll drop below that growth rate, then it is expected that the BOC will cut rates again.

The big banks are worried about their bottom lines and so they haven’t been passing on the entire interest rate cuts.  The fact is that the cheap mortgage interest rates are the sole reason we have any GDP growth at all.   People are gobbling up real estate and that has been our only real growth in big our big cities. The BOC can’t let us lose any of that tiny GDP growth have and so my expectation is that interest rates will stay the same or go lower.  Canada is one of the only countries to have an above 0% central bank rate and experts expect that we’ll have to go lower too.  Most of the largest economies have 0% central bank rates and 0% growth around the world.

You can learn more by reading this Globe and Mail article here!

With construction of housing the only growth area I’ll bet that the BOC will cut again later this year.  My variable mortgage rate is currently 2.3% and if the big banks pass on  -.15 from the BOC -.25% cut like they did last time I’ll save even more money.  When a cut happens the money that use to go to interest gets allocated towards your principle and the amount of years to pay off your mortgage gets reduced.  When interest rates go down it’s like you increased your payments – but you didn’t.  I’ve already jumped one year ahead on my payment schedule due to this last cut so I’ll be done my mortgage one year earlier.  Thanks BOC!  Love you.

Now that I’m on a role, I’m also going to increase my payments by $200 a month and see how much further I’ll get with that help.  A simple extra $50 a week will save you years in amortization and thousands of dollars!  If the BOC lowers rates again this year I’ll save even more years and dollars.  And this is why I love my variable mortgage in this market.

If you can’t stand to deal with the roller coaster of rates get a fixed mortgage but still increase your payments to max out on what you can afford.  You’ll thank me for it years later.

Have an awesome week,




David Lester
About David Lester

David Lester is a best selling author and professional Financial Coach, helping people be better with their money. David has written a personal finance book that breaks with traditional attitudes towards finance and describes his own philosophy to money that he has gained through his personal and professional experiences. His philosophy on money applies to many areas of everyday life, including banking, investing, goal setting, shopping and entertainment.