Kevin Warsh, who is a Governor of the US Federal Reserve did a speech last week in Chicago that had one very interesting sentence…
“I would hazard the view that prudent risk management indicates that policy likely will need to begin normalization before it is obvious that it is necessary, possibly with greater force than is customary”
Oh snap! That was fed-speak for “nice fuck up Greenspan“. But why is this interesting? Well, as someone who thinks they might be obtaining a mortgage in the next year it definitely hammers home that if you can lock down a low fixed rate mortgage, now is the time to do it. There’s no deals to be had on variable rate mortgages at the moment and this announcement really means that the Fed might raise rates faster and sooner than we’ve become accustomed too. I realize that Bank of Canada bank rates aren’t in perfect lock-step with the Fed but, if you exclude the early 90s, you’ll definitely see a pattern.
On this note, The Canadian Capitalist blog had a great post (and follow-up) about how the historic savings of variable over fixed rate might not apply in this time of historically low interest rates.