Quote:
Originally Posted by wheee!
That's why the banks now make you qualify for a 5% mortgage rate even if the rate is less than 3%.... All it takes is a minor fluctuation in Prime to make people unable to pay their mortgages.
Too many people living wayyyy beyond their means.
PS: Congrats on paying off the Z Mitch!
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let me clarify this for you as you seem to misunderstand how rates work.
variable rates are based on the prime + x
fixed are based on 5 year GOC bonds (sorry edit had it reversed)
any rate change will not affect anyone locked in during their fixed period however upon renewal thats where disaster strikes. As for the variables if prime/overnight rate does go up they will immediately be impacted.
banks are getting you to qualify for a 5% rate because they know the chances of rates going up in 2015 are more probable than staying the same or going down.
but i agree... living outside your means = set up for disaster!
(I do work at headoffice for a big red bank in the securities industry)