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Why are Canadians Favouring Fixed Rates Over Variable by 2 to 1?

 

In a recent survey, in the market commentary of one of the lenders I work with, First National, found that even that ultra-low but, apparently, unstable interest rates have Canadians favouring fixed-rate mortgages over variable by a ratio of nearly 2-to-1.

 

The survey, conducted by Nielson, for one of the country's big banks suggests 57% of homebuyers would pick a fixed-rate mortgage over variable, desiring certainty in their payments. That's up from 48% last year and 39% in 2011.

The numbers are fairly consistent across the country meaning Toronto and Vancouver are not having a major influence on the results.

 

The survey also indicates 44% of respondents expect to see interest rates rise in the next 12 months while 42% expect no change. By comparison, the markets appear to have a stronger expectation, as rates will rise, calculating a 64% chance of an increase by the end of the year. That, however, is down from a 77% chance calculated immediately following the latest U.S. Fed announcement. The Fed is hinting that it is more prepared to look at rate increases.

 

Taking a variable rate mortgage does comes with some risk but does have the potential for interest savings. It's definitely not for everyone but worth discussing when talking about rate and mortgage term options.
 
Give me a call should you want to discuss.

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