Mortgage Corner: Fixed or Variable?

The debate rages on, and you are probably inundated with opinions on the topic. But we are currently seeing an odd trend that’s worth looking into;

Why are fixed rates the only rates increasing right now?

In the past few months in Canada, you may have noticed fixed rates charging upwards by as much as .30% (or 30 bps). At the same time, variable rates have stayed low, so what gives?

The answer lies in how each type of rate is anchored; fixed mortgages are linked to the bond market. as bond yields rise, so do these rates. Variable rates on the other hand, are tied to the Bank of Canada’s prime lending rate. The Bank of Canada has publicly stated it has no plans to increase this rate as it delicately tries to revive the economy in the face of a difficult global crisis.

So does that make variable rates the way to go?

This still can come down to personal preference in many cases, but variable has a ton going for it, even when it doesn’t seem like they could go any lower. Beyond the current discount in favour of variable rates over fixed rates, there is a ton more flexibility when it comes to variable mortgages. If you decide to sell your property before mortgage renewal, the cost savings on terminating a variable vs a fixed can be huge, and if you think variable rates are set to increase, you can always switch to a fixed mortgage at any point.

The Right Toolbox For the Right Mortgage

Now that you have a better understanding of how Canadian mortgage rates work and change, I invite you to use the many mortgage calculators I have on this website to help you make an informed mortgage decision. Further, if you are considering investing in real estate, and want dialed-in custom Vancouver and Canadian calculators to help determine reno-flip roi, 5 year rental hold ROI, and many more, then head over to my real estate website to really supercharge your Canadian real estate investment portfolio!

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