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Fixed or Variable Rates and Trends?

As with any market, the current mortgage rates and trends fluctuate with the economy, inflation and other factors. Different kinds of mortgages have differing rates and separate companies will offer varying rates as well. With the alterations in rates over the years, it becomes beneficial for people to watch the market and enrol in a mortgage that gives them the best deal at the time. For example, for the past 30 years, it has been in the interest of the homeowner to have variable-rate mortgages in the majority of instances, according to BMO, and studies suggest that inflation should remain fairly insignificant in price fluctuations well into 2011.

According to the findings of economists in the industry, the difference in current mortgage rates and trends that exist between five-year fixed and variable rates has rarely ever been so high. It can be risky to sign up for a fixed rate mortgage, however, because if the economy does worse than anticipated, you are stuck with your rate with no variation allowed.

While BMO is correct in their findings about variable-rate mortgages, they also give due attention to fixed and open variable rate mortgage rates and trends.  Short-term rates are very low at present, building pressure for higher rates come next year. The reason to get a fixed mortgage rate is to fly under the inflation radar, but extreme price increases in mortgage rates have not been much of an issue since 1991. However, the trends may be changing within the next few years, possibly making the purchase of fixed rates more economical. The explanation for this is that record government deficits exist and the Bank of Canada may soon be forced to increase interest rates.   This would drive the rates of variable mortgage rates higher but leave homeowners who have fixed rates intact.

The only way to prepare for the future is to learn from the past. During the later 1970s and temporarily in the late 1980s, fixed rates were desirable above variable mortgage rates. This was because a period of rising interest rates was almost upon Canadians, which quickly drove variable mortgage rates up. Those who foresaw this and made sure to have fixed rates escaped unscathed. The situation Canada was in during those two time periods is similar to what is seen now, so the current mortgage rates and trends turns toward the benefits seen by fixed mortgage rates. Plus, peace of mind from a fixed rate can be worth it even if the economic predictions are wrong.

Current Mortgage Rates

Mortgage Term Rate  
1 year2.89%
2 year2.19%
3 year2.19%
4 year2.79%
5 year3.20%
7 year3.79%
10 year4.39%

View All Rates & Conditions

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