Based on the transcript, Dustan Woodhouse anticipated another hike on September 7, 2022, unless inflation numbers dropped dramatically before that date. He noted that if inflation hit nine percent or double digits, borrowers should count on another "super size" hike.
With a variable-rate mortgage, the payment typically stays static even when prime changes, though the allocation between principal and interest shifts. With an adjustable-rate mortgage, the payment actually moves up or down as prime changes. Dustan noted that most adjustable-rate holders were stress-tested at higher rates and remain capable of making payments.
He argues that life is unpredictable and two out of three Canadians break their mortgage early at an average of 33 months. Variable-rate mortgages offer significantly lower prepayment penalties—three months' interest—compared to fixed-rate interest rate differential penalties, which in one example reached $78,000 versus $5,500 on a variable.
Instead of locking in and potentially increasing the prepayment penalty by about 900%, Dustan recommends talking to a broker about moving from an adjustable to a variable-rate mortgage with a static payment. This caps the monthly payment while maintaining flexibility.
Dustan suggests seriously considering a variable-rate mortgage because the bond market was already softening and fixed rates may have already peaked. Variable rates offer a lower initial rate and the flexibility to lock in later if rates come down inside the five-year term.
