The Majority of Canadians Prefer a Fixed Mortgage—But Is It the Best Choice?

A new study shows that the majority of Canadians prefer fixed mortgages. While many first-time home buyers like the idea of fixed monthly mortgage payments, it’s important to remember that there’s more to finding the right mortgage than just the interest rate. And when it comes to getting the best mortgage, it pays to shop around.

More Canadians Choosing Fixed Mortgages

With the spring home-buying season heating up, more would-be property owners are looking to get pre-approved and find their dream homes. But when it comes to signing on the dotted line, most Canadians are choosing to lock in their monthly mortgage payments.

In fact, 57% of Canadians are selecting fixed mortgages , up sharply from 48% in 2014, and just 39% in 2011. By contrast, over the last number of years, a smaller percentage of Canadians would pick a variable-rate mortgage. Just 30% would select a variable-rate mortgage today.

On top of that, 11% of respondents were undecided between a fixed and variable-rate mortgage. That’s down from 19% in 2014 and a whopping 25% in 2011.

Canadians are favouring fixed-rate mortgages because they don’t think interest rates will fall further. Almost half (44%) of Canadians expect mortgage rates to increase next year, down from 47% in 2014 and 61% in 2011.

Still, 42% of Canadians believe interest rates will stay the same in the next 12 months, while nine percent think rates will fall even further. The fact of the matter is that there is a case to be made for even lower rates.

Will Interest Rates Fall Even Further?

The Canadian economy is highly dependent on oil and gas. In fact, crude oil accounts for roughly 14% of Canadian exports. Plunging oil prices, which have dropped from just over $106.00 per barrel last summer to around $47.00 today, are having a detrimental impact on the Canadian economy.

As a result, the Bank of Canada unexpectedly lowered its key lending rate (which affects variable mortgage rates) in January from 1.0% to 0.75%. Thanks to a weak global economy, oil prices are expected to remain lower for the near future.

The Bank of Canada has hinted that it will keep rates near record lows for a considerable period of time—and it has not ruled out further cuts.

Shopping Around for a Mortgage Can Save You Money

Fixed mortgages are an attractive option for those who want to know what their mortgage payments will be for the next five years.

But there is no one-size-fits-all approach to mortgages. The lowest rate does not necessarily mean the best mortgage. It’s important for first-time home buyers, or those thinking of refinancing or renewing their mortgages, to look beyond interest rates.

While rates are important when it comes to deciding whether or not you want to get a fixed or variable-rate mortgage, it’s also important to look at whether or not you can handle other incidentals, such as household expenses and unexpected costs.

There are a lot of factors to consider. And when it comes to finding the right financial product, it’s best to go with the licensed, independent agents at Canadalend.com . Just because some of Canada’s biggest banks are advertising a low rate doesn’t mean it’s the lowest rate on the market. Nor does it mean it comes with the most flexible options.

Many first-time home buyers do not realize they can negotiate when it comes to getting a mortgage. Using a mortgage broker like Canadalend.com is the optimal way to get the best rates and options.

Because the agents at Canadalend.com are independent, we have access to mortgages from hundreds of different lenders. We can also get you pre-approved for a mortgage. Pre-approval lasts for 120 days and is locked in from the day you start the process.

If you’re trying to decide which kind of mortgage is best for you, contact Canadalend.com today to set up a free consultation. Or apply online and one of our private mortgage specialists will help you set up an appointment at your earliest convenience.

Source:

“Canadians increasingly opting for peace of mind when it comes to their mortgage: CIBC,” CNW web site, March 30, 2015; http://www.newswire.ca/en/story/1509695/canadians-increasingly-opting-for-peace-of-mind-when-it-comes-to-their-mortgage-cibc.