Variable or short-term fixed mortgage? Where experts see the ‘sweet spot’
The Canadian mortgage space is already seeing some rates on offer decline heading into the spring market, despite no clear indication yet from the Bank of Canada that interest rate cuts are imminent.
Experts who spoke to Global News say despite variable-rate mortgages remaining the more expensive option today, it’s a “good environment” to consider the product for homebuyers and refinancers who are comfortable with a bit more risk.
James Laird, co-CEO of Ratehub.ca, says it’s a better market to get a mortgage today than last fall when rates peaked.
Fixed mortgages on offer have declined to the point where some three- or five-year terms are carrying rates of less than five per cent. Some homebuyers can secure an insured five-year mortgage rate as low as 4.79 per cent, according to Ratehub’s aggregated list of rates on offer.
Fixed mortgage rates are tied to Canada’s bond market, which sees yields rise or fall depending on market expectations for interest rate cuts from the Bank of Canada.
“There’s been lots of optimism about rate cuts coming at some point this year,” Laird says.
Bank of Canada officials have been mum on when interest rates could start to decline following the most aggressive tightening cycle in the central bank’s history. Nonetheless, most economists are pencilling in rate cuts to start in late spring or early summer, depending on how inflation and other economic data unfold.
Tiff Macklem, the governor of the Bank of Canada, warned recently that even when rates do start to fall, they will not decrease at the pace they rose and are unlikely to return to their pandemic-era lows.
The recent decline in mortgage rates, combined with expectations that those rates will fall further, makes the choice between a
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