Personally, I will always opt for a fixed mortgage rate over a variable rate. It’s a decision based on your risk tolerance and overall budget.
In a research report by National Bank Financial, a record 95% of borrowers opted for a fixed-rate mortgage in June. This is largely due to the uncertainty around the Bank of Canada. Are we at the peak? How long until variable rates go down? Is it worth paying more in interest now with the hope rates will decrease in the long run?
For me, I prefer to know exactly what my payment will be for the next 5 years. I can budget. I know my cost of borrowing and how much principal vs. interest will be paid over my term. I prefer certainty. This isn’t the same for everyone.
Some things to consider when picking a fixed or variable rate:
– It’s very hard to predict whether this is the peak. A lot of people didn’t think these latest 2 increases would happen after the pause earlier this year.
– Historically, variable-rate mortgages have resulted in lower payments and lower interest paid over time but this last year and a half has been different. Some have seen their payments double in the last year.
– One thing to think about is your budget. If you prefer to know exactly what is coming out every payment or if you’re okay with that potentially increasing or decreasing.
– For my clients, I always watch fixed rates for substantial decreases that may indicate it is time to break their current term and get a lower rate. There is a penalty to break the term but it can often be worth it if you can save more than the penalty in interest and lower your payment.
I’ll be your trusted advisor to help you decide which option is the best for your current needs and future goals. Let’s talk.