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5 Year Fixed Mortgages Possible Risks

Posted on 5th Nov 2014 by Mark Stern
Risk concept.


A fixed mortgage is considered safe during recent years as it allows the borrower to know the mortgage payment options and it will not change during the term of the mortgage.  However, there are lots of people who believe that it is not really that safe especially when it is about 5 year or 10 year terms. If the rate is low for five year and ten year terms, it is already very enticing to get the advantages of these days low interest. The biggest question that you will surely get is, if you should go for a 5 or 10 year term. But before you proceed to that, it is important for you to consider the following:


  1. The household debts of Canada is currently high and expected to continue in increasing since the Bank of Canada  has to  be close with US   benchmark rate and dollar rate in  Canada  will increase high  with negative effects to the exports in global economy.

  3. The benchmark rate will remain near at zero percent until the end of the year 2014.

  5. The governments in all part of the world is currently stimulating and printing money since the year of 2008 to grow the economy again and this lead into high government deficit and debts. Government are carrying the huge loaf until some private sectors have the feeling that it is already their time to begin on spending again.

  7. There is a current situation wherein the European crisis is taking the huge amount of debt through bailing out different countries.


The said factors can actually be the cause of inflation. Nobody knows if inflation could actually happen but there can be the possibility of this thing with unsure percent of how much. Those homeowners that are taking or renewing mortgages in  year 2012  have to renew in coming year of 2017 (just in case they take the five year term).But based on some facts, the US  Federal Reserve  are into keeping the rate near at zero  and Bank of Canada  have to stay closely till the year end of 2014 . It is likely an aggressive rate that increases and will commence in year 2015 for controlling the inflation and slow down the debt to Canadian Household.


These given risks should be given attention before deciding to take a five year fixed rate mortgages. The ten year fixed mortgage may give more protection than the five year term from the rate and economic shock as result. Expect that mortgage is portable and the day after 5 year, the penalty will be based on the three month interest and not into the rate differential. If you are going to get a mortgage term, it can be better if you are going to select the long term ones. Why? It is because they seem safer for a mortgage and as a strategy at the same time. you should always be aware of the possible risk that you are going to face when you get the term for a mortgage to make sure that you will not be burdened by the result of taking  the wrong term.

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