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Risk Tolerance and Mortgages

Fixed, Variable or both. Rate that is.

Fixed rate mortgages are chosen because of their stability. Your lock in your interest rate for the term of the mortgage. Many Canadians shy away from variable rates because of potential risk of rate increases. Many Canadian economic experts believe that a mortgage rate the varies with the Prime rate will offer the greatest advantage when it comes to long term savings. Examining Canadian rate data from 1950-2007 it was found that people would saved $20,000 in interest payments over 15 years (based on a $100,000 mortgage); and would have been better off with a variable rate compared to a five-year fixed rate 89% of the time.                                                                                                                                                                                                     

If you're unsure about your level of risk tolerance, choosing both allows you to take advantage of the lower rate on a variable and the security of a fixed rate.

Tony Marchigiano | Mortgage Specialist - Mortgage Sales BC Region, RBC Royal Bank | Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054

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