The two-year fix might be your sweet spot

There's been plenty of chatter about interest rates lately (just for a change!), with predictions flying around about what will happen next. But we're starting to see a return to what I'd call 'normal' in the mortgage market. And by normal, I mean how things worked before Covid turned everything on its head.

Cut through the rate noise

Let's cut through all the noise. Yes, we're expecting some movement in short-term rates (those 6-12 month fixes) after the next OCR review later this month. But those longer-term rates? They're likely to stay put, and some might even creep up a bit.

Now, this is where it gets interesting. The two-year fixed rate is emerging as the 'sweet spot' – something we haven't seen since around 2018. It's like bumping into an old friend you haven't seen since before the pandemic!

A client recently contacted me who always does his homework thoroughly before he talks to me. He told me, "I've been tempted by the two-year deal based on the market commentary, so your comments have confirmed that for me."

Another client has already secured a two-year rate with a significant monthly reduction of 400 bucks a month.

Don’t chase the lowest rate

Here's a story that really drives this home. Just the other day, I was talking to a client who told me that they'd gone for what looked like the best rate at the time, put all their eggs in one basket, and when rates increased? They got hit all at once (they should have talked to me)!

You see, chasing the lowest rate is a bit like buying the cheapest insurance – it might feel good at first, but you could end up paying for it later.

The smart mortgage structure

Here's what the savvy borrowers are doing (and what I'm recommending to my clients) – split your mortgage. I know, I know - it sounds more complicated than just picking one rate and being done with it. But hear me out.

Splitting your mortgage isn't about having the absolute rock-bottom rate – it's about getting a better average while keeping some flexibility up your sleeve. Think of it as not putting all your mortgage eggs in one basket.Let me share a recent example that shows why flexibility matters. I've got a client returning to near full-time work this year. Great news, right? But it's a one-year contract, so the income could be temporary. We've structured their mortgage so they can use their payment savings to cover some health expenses, while keeping some wiggle room for when circumstances change.

What about global events?

I can't write about interest rates without mentioning the elephant(s) in the room. We have a new US President with strong views on protecting the US economy (which could be inflationary and may affect interest rates here), ongoing international conflicts, and a weak dollar, which is driving up the price of petrol. But to be honest, trying to structure your mortgage around global events is a bit like trying to predict the weather a year in advance. Instead, focus on what you can control.

Reading the crystal ball

By the end of 2025, we might see some tasty three-year rates – possibly dipping sub 5%. Sounds good, right? But don't get too excited and abandon your strategy. Remember, it's not about timing the market perfectly – it's about having a structure that works for you regardless of what happens.The key message here? Stop obsessing over getting the absolute lowest rate (I know, easier said than done). Instead, think about structure, flexibility, and your personal circumstances. Ask yourself three questions:

1. Could your income change in the next few years?
2. Might you need access to additional funds?
3. How would you cope if rates went up significantly?

Getting your mortgage structure right is like building a good house – you need solid foundations, not just a pretty paint job.

Need help figuring out the right structure for your situation? That's what we're here for. After all, mortgage rates are just one part of the equation – it's how you set everything up that makes the real difference.