Should You Consider a 10-Year Mortgage Rate?

With interest rates at record lows, it might be tempting to consider a 10-year fixed rate. After all, at the current rate of 5.35%, that number is significantly lower than the past decade’s average five-year fixed mortgage rate of 6.78% (albeit, the posted rate).

The tricky thing about 10-year rates is that it’s impossible to predict where interest rates will go within a decade. In the past decade alone, five-year fixed rates fluctuated between 8.75% and 3.49% – and variable rates were even lower. True, if you were to opt for a five-year fixed rate, rates may be substantially above 5.35% when it comes time to renew – or they may not.

A better option is to take a shorter-term fixed mortgage or variable (depending on your level of risk tolerance) and pay the 10-year rate on it. This way you’re paying down much more principal, thus shrinking your overall mortgage balance upon renewal. With a smaller mortgage you’ll be able to tolerate a slightly higher interest rate, and you’ll be leaving yourself open to the possibility that, in five years time, rates will still be below the current 10-year fixed rate.

That being said, every situation is different and a 10-year rate might just make sense for you. To be sure, please contact one of our Licensed Mortgage Brokers to chat about the specifics of your situation.