Back in 2008, I opted for a variable mortgage rate and it has proven to be the best decision ever. My rate is currently at 2.50%, a substantial drop from the starting point of 4.25% in 2008. With less than a year to go before I get to renew the 5 year term, you will be surprised that my decision has already been taken before hand to stick to a variable rate mortgage for the following 5 years for a few reasons.

People that go with a fixed rate mortgage typically like the predictability of their payment. They prefer to pay a higher rate rather than save a little bit of money in exchange of uncertainty. In my case, the uncertainty was a welcome addition because this level of pressure that I introduced on my finances translated into lump sum annual payments. I was simply racing to pay off as much as possible in a defensive manoeuver against rising rates that have yet to materialize.

The strategy has worked perfectly for 3 reasons starting with enjoying a stable job at the time, having the risk tolerance for variable rates and finally my personal preference of injecting extra cash flow into my mortgage rather than invest it. As a result, my outstanding principle is currently more than 50% lower than the initial starting point.

But with today’s small difference between fixed and variable mortgage rates, is it still worth going with a variable rate? In my opinion, you bet! Brokers, analysts and other pundits have claimed over the past 3 years that creeping mortgage rates were imminent. Yet here we stand with Canada’s rates frozen in time and if you’ve read my last set of interest rate predictions, I believe they’re going nowhere soon.

You see the debt woes of Europe are not something you can fix in a few months. It’s a matter of a few years, there’s a lot of deleveraging to do and a lot of balance sheet fixing to happen. Unless debt is outright wiped out – ie default – there is no easy fix.

Europe’s debt problems are weakening the global economy where even the rising BRIC countries are feeling the impact. The US has its own issues and has declared more than once that its rates will be frozen until the end of 2013 if not beyond. Canada is no island and will have to take the state of the global economy in consideration before raising its rates.

This is the basis of my move, rates will not be moving in the near term and when they do start moving it will be gradual and slow for fear of shocking the economy. The risk of seeing rates exploding higher is mitigated by my lower principle and the fact that I can lock up a fixed rate at any point in time. It’s not like we will wake up one day with a rate bump of 3-400 basis points in one shot.

While I am on track for a happy ending in my mortgage journey so far, I did commit one mistake: I never went shopping for mortgage rates. At the time, I simply went to my bank and signed the dotted line. Don’t get me wrong, it’s still a good rate but I might have done even better had I visited a mortgage broker. I might have also ended up with better prepayment terms as I am limited to a max of 10% per year – I’ve met some friends with up to 25% for a maximum. No matter, at this point all I am looking forward to is closing off the remaining mortgage in the next 5 years as a maximum timeframe.

Today, would you go with Fixed or Variable mortgage rates? 

With the federal reserves’ pledge to keep interest rates low until mid-2013, the cordon has closed around Canadian interest rates for the next 12 months in my opinion.  Mark Carney, the governor of Bank of Canada, will have no choice but to keep his rates where they are now for longer than anticipated.

This is great news for variable rate mortgage holders such as me (variable since 2008) and for those who are in debt regardless if it’s classification as good or bad. I bet you’re not thrilled with the news if you’re an adept of saving money in low risk vehicles (money market funds, GICs, etc). Unfortunately, you will have to support the pain of low rates until the economic environment changes and it will, one day.

Given the fear frenzy that we have witnessed so far this month, it is safe to expect the same Canadian interest rates for the rest of 2011 with a high degree of certainty. Always keep in mind that Canadian interest rates are influenced mostly by the US economy as they are our biggest trading partner with 74.9% of our exports in 2010. My prediction is based on a few economic factors:

• Stubborn high unemployment in the US
• European and US debt overhang
• Disappointing slow growth in the US
• A US housing market in limbo

Add to that the latest statement from the G7 central bankers meeting on August 7 promising to “take all necessary measures to support financial stability and growth” and the recipe for NO rate hikes in the short term is complete as raising interest rates is certainly not a known measure that supports growth.

But what about 2012, isn’t it too early to call? Of course not, 2012 is right around the corner and I believe Canadian rates will remain subdued until at least mid 2012 based on the factors discussed above. Let’s put it this way, economists are currently seeing another recession at a 25% chance and growth expectations for the second half of 2011 while positive at 2.3% still indicates a vulnerable economy. Energy prices have tumbled as well this month which should tame the inflation beast reducing the urgency of a rate hike.

When it comes to forecasting interest rates, everyone stands equal regardless of how many titles they hold, they are what they are: predictions. The variables underlying my expectations might change quickly as we’ve seen how the mood (markets) can swing aggressively in a short period of time. On the other hand let’s not kid ourselves too much, it will take a miracle for the US economy to start generating +300k jobs every month to accelerate its recovery and it is not in Canada’s interest to go solo with interest rate hikes as it will hurt whatever is left of its manufacturing base. Finally, keep in mind that Canada is not immune to global economic woes, just take a look at the TSX chart of this year…

In the next 12 months, a rate hike of +0.25% (25 basis points) might still happen but it will not be as surprising as a cut of 25 basis points in Canadian interest rates. I personally prefer to be surprised with a rate hike next year as a cut will indicate a worsening economic environment.

What’s your take on interest rates?

Who’s your best friend when you start to run a retail business? Your employees, if you have any. They’re the people who will help you take money from customers. Hang on though, what about your bank manager? He or she is definitely worth keeping on the right side, just in case things get sticky and you need a bit of finance.

It’s true that your bank manager and your employees are your good friends if you treat them right, but they aren’t going to be your best friends, oh no! Your best friend will stand by you through thick and thin, will put up with (quite) a lot of abuse, and won’t answer you back. Have you got it yet?

Nope, the answer is not a dog. It’s your POS system. Okay, so it’s not going to be a shoulder to cry on when things are tough and it won’t come for a drink to celebrate a great day’s profit, but it will take a lot of work off your shoulders, providing you choose the right one for your business.

Just to help you get off on the right foot when selecting your first point of sale solution, here are five things you should look for.

1) User Friendly Operation

It’s going to be important that your best friend and your other friends get along. In other words, you don’t want your system to be the cause of employee dissatisfaction. So try to choose a solution that’s simple to set up and easy to use. Ideally, your point of sale solution should be so intuitive that training an employee to use it confidently takes less than an hour. Leading Providers, provide software that are relatively easier to learn and follow; thereby, enabling your business to thrive by cutting down on the overall cost and time of training your staff to use the acquired software.

2) Inclusive Back up and Support

Your best friend should have its own group of amigos to bring to your party, just for support, of course. When you’ve a store full of customers, the last thing you need is to have a problem with your POS system and nobody on hand to help you resolve it. Be sure to ask system vendors about their customer care policy. You need confidence that help is just a phone call away in the event that your hardware or software breaks down.

3) Free and Easy Upgrades

So you and your best friend don’t drift apart over time, you need to know that the solution you go in for is going to be future proof. Look for a system that’s built on a flexible platform and can be quickly and easily upgraded as new technology, such as mobile payment matures. Remember to get confirmation that these upgrades will be free too, at least for a reasonable period of time. The ideal way to go about it is to take professionally managed services, such as those offered by companies this would ensure that you don’t have to worry every time a new upgrade comes along, since reputed providers will make sure that you are up to date with minimal intervention on your end.

4) Affordable and Transparent Pricing

A true best friend will never have you putting your hand in your pocket unnecessarily. However, some vendors have subtle ways of continuously extracting money from you. Remember, there’s no such thing as a free lunch. If you aren’t paying something for the system up-front, make sure the pay-as-you-go pricing doesn’t tie you to a contract or subject you to cancellation fees.

So-called free point of sale solutions usually involve an agreement with a credit card processing service, who take a little piece of every card payment made by your customers. Over the term of the contract, you will probably pay the price of the POS system a few times over. If you can manage the initial investment, it might be better to purchase your system outright.

5) Compatibility with Your Online Web shop

If you run an online business on an ecommerce platform as well as a bricks and mortar retail outlet, you could opt for the ultimate best friend experience. Cloud based POS systems provided by Shopify , can help you run applications that can be used on an iPad or other portable device. The best thing about these systems is that they synchronize your physical and online business, meaning you don’t have to worry about managing separate inventories and payment systems.

Concluding Thoughts

Perhaps it would be a little sad if you really had a best friend relationship with your point of sale solution, but in all seriousness, it will be the most important tool in your retail business. So it makes sense to select the right one first time. Hopefully, the tips above will prove helpful in making an informed selection.