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Revisiting Fixed Vs. Variable Mortgages

Writer's picture: John Lee - Arise MortgageJohn Lee - Arise Mortgage

Updated: Mar 16, 2021

It’s the classic rate decision many mortgage shoppers are faced with. And it’s only been made more complicated since the start of the pandemic. Towards the latter half of 2019, variable rates were flying off the shelves with rates as low as prime – 1%. A lot has changed since then.


As rates change due to the pandemic, there remains a question of choosing a fixed rate or variable rate mortgage. Know the difference and how it will impact your future plans.
Fixed or Variable Mortgage Rates, which option is best for you?

In March, fears over the COVID-19 pandemic and the subsequent lockdown forced most banks and other mortgage lenders to cut their fixed rates from 3.95% to 2.45% within the span of just one month. At the same time, variable-rate discounts were scaled back to just prime – 0.15% to 0.25%. By the summer fixed rates were setting historic lows. That led to a dramatic shift in mortgage selection by borrowers.


In a recent BMO survey, a majority of homebuyers (57%) said they would choose a fixed rate when it comes time to renew. Among those still on the fence, they admit that COVID has made them more likely to gravitate towards a fixed-rate mortgage. Just 8% said they’d be more likely to choose a variable rate.


Why the shift in mortgage preference?

First, they’re among the most competitive mortgage products on the market. And many believe variable rates have no more room to fall, given that the Bank of Canada’s overnight target rate is holding at 0.25%.

Second, homebuyers are attracted to the stability that fixed-rates offer. They can lock in a rock-bottom rate for five full years.


The outlook

The BoC, in its recent Monetary Policy Report, suggested that rates won’t be rising until at least 2023, which is when inflation is expected to return to full capacity. Some forecasters, such as those at TD Bank, don’t expect the first-rate hike until 2024.

With forecasts like that both variable and fixed could be good options. 

If you are in the process of shopping for a mortgage and are undecided about whether to take a fixed or variable rate, we can help you understand the pros and cons and offer personalized solutions.


If you want to know more, check out my Youtube video on Fixed or Variable rates!


So, call us today, and let’s talk!

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