INTEREST RATES: Variable or fixed? Both options have merits.

With a 10-year mortgage, you're entirely insulated from the coming cycle of interest rate increases.

Whether you prefer to go fixed or variable with your mortgage, there are developments you need to know about if you want protection against rising rates and ways to outsmart your bank.

Let's start with fixed-rate mortgages, where we continue to see borrowing costs at close to historic lows. Most people go with a five-year term, but there's a case to be made for choosing terms of seven or even 10 years.

Rubbish, you savvy borrowers are no doubt saying. The premium to lock in for seven years is too high to make it worthwhile.

"There's not a right or wrong choice," replies Peter Majthenyi, a mortgage planner with Mortgage Architects in Toronto. "It's capturing the temperament and risk tolerance of the client."

These days, those of Mr. Majthenyi's customers who prefer a locked-in rate are commonly going with 10-year mortgages at 5.3 per cent. That compares with his best rates of 3.79 per cent for a five-year mortgage and 1.95 per cent for a variable-rate loan.

Some homeowners can't get comfortable with the idea of paying such a large premium to lock in a mortgage for a decade, Mr. Majthenyi said. But there are cases where it makes sense. Example: People who are buying a house in today's hot market and want some cost certainty as they take on a mega-mortgage and look ahead to years of rising rates.

(prepared by Rob Carrick/Globe and Mail)