Variable Rate Mortgage Terms Are Starting to Look More Appealing: Here's Why
Over the past few years the majority of people have been preferring a fixed rate over taking a variable for their mortgage. There's a few usual reasons. That being the fixed rate gives you more security. It also keeps your payment and/or amortization the same throughout the term. A bigger reason is that fixed mortgage rates have been just so low and so attractive. That coupled together with the fact that the spread, or difference, between a fixed and variable rate mortgage has also been historically low. Back in June the best 5 year fixed rate you could get was 2.89%. The best variable rate was 2.6% So why should one take a variable over a fixed if one jump in the Bank of Canada rate, which affects variable rate mortgages, would put me above the fixed rate I could hold for 5 years. Note: there are numerous other factors to consider including the way interest compounds on either and the penalties involved; they're both different.
Now that fixed rates have risen by close to one percent, especially the most popular 5 year term the variable rate term is starting to look more attractive. Instead of a .25% there is now about a 1% difference between a 5 year variable and a 5 year fixed. A 1 to 2% spread is more of a usual difference between these two rates.
Talk to your mortgage advisor, in depth, to discover what might work best for you and your circumstances and risk tolerance.