Variable or Fixed Rate Mortgage?

If you’re arranging a mortgage right now and you’re feeling a bit intimidated about whether to choose a fixed or variable rate, you’re not alone. Even The Bank of Canada’s Mark Carney, probably wouldn’t know which to choose either. Mr. Carney’s decision to hold on increasing the key interest could have really gone either way, according to experts. Earlier in the year, improved market conditions spurred a slow and steady inflation of the BoC’s key interest rate with three straight increases. The BoC seemed determine to continue on this path despite the deteriorating market in the US, but then the bottom fell out in the European market, further undermining Canada’s move toward stability.

Now this sounds all very glum but interestingly enough, due to the historically low mortgage rates and increasing affordability of housing, the Canadian real estate market stayed fairly strong, regardless. So we were up and then down and then up again. At the moment, we seem to be in a holding pattern, waiting on the next step of the global recovery to continue with our own.

Are you with me so far? It’s OK, I lost myself at “ feeling a bit intimidate”. For one experts opinion about whether to choose the variable or fixed in the current market conditions, check out this article on Canadian Mortgage Trends.com – it reviews a talk given by CIBC economist, Benjamin Tal, last week to the banks broker channel, First Line Mortgages.

Here’s an excerpt;

“What Carney is telling us,” Tal said, “is (the Bank of Canada) has no clue what is going to happen.”

In regards to the variable or fixed rate Mr. Tal commented;

“I’m almost convinced that over the next 2-3 years variable will be better. In the last two years fixed will be better. But, the gap (between fixed and variable) will not be significant over five years.”

That said, if he had to choose today, he feels that “mathematically speaking,” variable-rate mortgages will “probably” outperform fixed rates.

From our experience, a variable rate, no matter what the monetary benefit can be a bad fit for some clients. We think your mortgage should never keep you up at night and if your personality or your budget doesn’t allow for risk tolerance, a fixed mortgage rate can sometimes be the better way to go. With so much uncertainty, now more than ever, it’s important to speak with an unbiased mortgage professional who can help you decide what type of rate best suits you and your future financial goals.


As the company’s first employee, Jennifer has been a Licensed Mortgage Associate since 2004, but her current role is not focused on mortgages. She is the resident blog writer and…

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