What does it mean when 5 year fixed is lower than 5 year variable
For the past 10 years, we've had 2 5-year variable rate mortgages. We have more or less won the bet in the fixed vs. variable game.
In the past, the variable was always a lower rate than the fixed. However, while doing my research I discovered that fixed is now cheaper than variable. What does this indicate about rate prediction over the next few years? Is this a prediction that the interest rates will drop?
Typical rate chart:
5 Year Variable Mortgage 3.25%
1 Year Fixed Mortgage 3.49%
2 Year Fixed Mortgage 2.74%
3 Year Fixed Mortgage 2.79%
4 Year Fixed Mortgage 2.94%
5 Year Fixed Mortgage 2.89%
7 Year Fixed Mortgage 2.99%
10 Year Fixed Mortgage 3.19%
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What does this indicate about rate prediction over the next few years?
It indicates that the market believes that the near-term interest rate will drop below 2.89% (to bring the average down from 3.49% to 2.89%) over the next 5 years.
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