This is sometimes referred to as interest rate averaging. In the past a few brokers have sold this as a “unique value-add strategy.” To be honest it is a simple but valuable concept.
Although increasing mortgage rates are still at least 12 months away, it is now time to start splitting your mortgage into multiple fixed rate terms.
The rationale for this is to not have all of your mortgage mature at the same time. By staggering your mortgage across multiple fixed rate terms, you will be less exposed to sharp increases in mortgage rates later on. Imagine your whole mortgage rolling off a rate of 6.50% on to a rate of 8.00% in 3 years time.
There is no rush to split. It can wait until your next fixed rate maturity and go from there. We are still a wee way off it really mattering (I don’t think we’ll see the 1 Year rate get over 8.00% for another 2-3 years at a minimum and I don’t see it going much higher than that full stop.) Equally rates won’t fall from here.
My personal preference is to split between a 12 and 18 month fixed rate. I have already recommended short-term rates over long-term rates and that view has not changed. The 1 Year and 18 Month rates are easily the best value and give you two opportunities in the not too distant future to reassess your interest rate strategy.
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