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Fixed and Variable Rate Mortgage Pricing

Fixed Rates


For the most part, Fixed Mortgage Rates follow the bond market.  A 5 year Fixed Mortgage will follow the 5 year bond, and a 10 year Fixed will follow the 10 year bond, and so on.  Bonds are primarily driven by economic factors, such as unemployment, exports, and inflation.  Fixed rates are set and forget mortgages, where payments are guaranteed to stay the same for the length of the term, 5 or 10 years for example.



                       5 Year Bond Chart



                       10 Year Bond Chart

Variable/Adjustable Rate Mortgages


Variable/Adjustable Rate Mortgages are priced alongside the Prime Lending Rate.  The Prime Lending Rate is driven by the same economic factors as the Bond Market, unemployment, exports and inflation.  Variable/Adjustable Rate Mortgages are priced as +/- the Prime Lending Rate.  For example, Prime is currently 3.00%, and 5 year Variable/Adjustable Mortgages are currently available at Prime -0.65%.  This would equate to 2.35% as a mortgage rate.  If the Prime Lending Rate increases by 0.25% during the term, that mortgage would then also increase by 0.25%.  The same holds true if prime were to decrease.


Variable Rate - As Prime increases or decreases,

the borrowers mortgage payment will also



Adjustable Rate Mortgage (ARM) - As Prime

increases or decreases, the amortization (total

length of the mortgage for example 25 years)

will increase or decrease to accommodate the

extra or reduced interest.

Do any of these situations look like yours?

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Copyright 2015 - Chris Friesen

Winnipeg, Manitoba