Torn between a 3-year or 5-year fixed mortgage? Here are a few things to consider

If you’re currently shopping for a

mortgage rate

, you’re probably lighting a candle for lower

oil prices

.

The crude oil spike has launched

inflation

expectations into orbit, which is never good for

interest rates

.

In basis-point terms, most

fixed mortgage rates

have jumped by double digits over the past week. (

Variables

are holding steady.)

Somehow, a handful of providers are still clinging to rates near or below four per cent on a five-year fixed, mostly for default-insured borrowers.

Carefully consider the term

If you’re torn between a three-year fixed and a five-year fixed — the mortgage argument currently sweeping the nation — here are a few things worth noting.

First, consider how long you actually need the mortgage and whether you’ll want to borrow more or relocate before five years are up.

If there’s a reasonable chance you’ll need to make changes before five years, spend less time admiring the lender’s shiny discounted rate and more time scrutinizing the contract’s prepayment penalty formula, early-refinance options, portability clause and rate transparency.

That last one is especially key if you might need to borrow more before maturity. Reason being, if you need to renegotiate before your term is up, you don’t want the lender pulling shabby rates out of its hat, knowing you’d have to eat a penalty to walk away.

And one last point. With inflation risk at a multi-month high, don’t be afraid to pay a little more for the added year or two of rate security — assuming you’ve found a flexible lender and need long-term financing.

Maybe it’s the right call, maybe it’s not. But with

bond markets

pricing in three rate hikes in 12 months, paying 10 or 15 basis points for the privilege of not refreshing rate tables at 2 a.m. seems like a bargain.

Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.

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