With the Bank of Canada announcing it is maintaining its key interest rate, variable rate mortgage holders can cheer about their payments remaining unchanged. Meanwhile, the price of some fixed-rate mortgages has been inching down in recent weeks, just as new product innovations are coming to market. The current climate of cooling rates and continued innovation is enabling mortgage consumers to boost their buying power.

Currently, the carrying costs of variable-rate and five-year fixed-rate mortgages are the same. A competitive variable rate mortgage can be obtained for a rate as low as 5.10 per cent. On a $200,000 mortgage with a standard 25-year amortization, this means a monthly payment of $1,175. By comparison, we can get a competitive five-year fixed mortgage at the exact same rate today.

Then, what do we based our decision on? Two things – the first being the future interest rates – what do you think the prime rate will do over the next five years? If you think your average prime rate will be lower than 6% - you’re better off with the variable rate.

The second fact to consider is your ability to handle rate fluctuation. Are you jumping every time you hear the prime rate may go up or the economy might slow down? If your mortgage payments increase, will it affect your life style much? Will it keep you up at night, wondering how high the rate may go in the future? If so, you’re better off with the fixed rate.

I see the fixed rate as an insurance fee – you won’t get the benefits of possible lower rate in the future but you are rest assured of your payments and rate for the next five years.

Current conditions in the mortgage market are favourable for consumers. At the same time some rates have been cooling, a host of new mortgage innovations have been introduced in Canada, including 100% financing options and mortgages with a 40-year amortization and interest-only periods.

While these new mortgages can improve monthly cash flow, they can result in more interest being paid over the life of the loan. These options are best for individuals who expect their income to grow. As it does, they can increase their mortgage payment and effectively reduce the life of their mortgage.

When looking at all the options available today, it is more important than ever to get professional advice. Linda Renaud is an Accredited Mortgage Professional in Kelowna and can be reached at 878-6706.