15 Sep

Fixed vs Variable?


Posted by: Linda Colpitts

With interest rates hovering near record lows, many Canadians may be considering the purchase of a home. And in the current interest rate environment, now more than ever homebuyers are grappling with the age-old question of whether to choose a fixed or variable rate mortgage.


“With short-term rates now likely to stay at very low levels, and long-term rates testing record lows, whether to lock into a longer-term fixed mortgage rate or choose a variable rate continues to be a hot-button issue among homebuyers,” says Benjamin Reitzes, Senior Economist, BMO Economics.


Historically, research shows that there is little debate as to which has been the better option for homebuyers. Typically, borrowers save money by staying in variable products, and riding the rollercoaster of fluctuating rates. In fact, since 1975 the cost-effective route for borrowers was to stay variable 83% of the time. And while the spread between five-year fixed mortgage rates and variable rates has fallen from the all-time high hit in mid-2010, it remains historically elevated.


But before declaring a hands-down winner, Reitzes points out that there are a number of important things to consider.


Click here for Reitzes important points