Asked by John M
I currently have a SOR based mortgage which is out its lock in period. The rate is a bit uncompetitive so I am looking into refinancing options. My bank is suggesting a mortgage based on a spread below their board rate which gives the lowest interest in the first year but the spread reduces quite aggressively over the next 3 years, whereas a SIBOR based package reaches a much lower maximum rate over that period (based on current interest rates). They say I can always elect to re-price after one year but I’m not sure that’s a good strategy – the market conditions could change and the deal available in one year’s time may not be so good. I have read that the advantage of SIBOR over board rate is transparency but according to the bank in practice their board rate has been very stable over the last few years, whereas SIBOR varies from month to month It is tempting to just look at the initial rate and re-price every year but should I be taking a longer term view?
914 views
