Anybody shopping for a mortgage today will likely be asking themselves if a variable or fixed mortgage is right for them.
The answer to that question is trickier than it has been in years, as the Bank of Canada is poised to continue steadily dropping its key interest rate this year. It’ll likely take just one more rate cut until variable rates are priced at or below long-term fixed rates.
In the past, variable rates have usually been priced cheaper than fixed rates. That’s because the lender is effectively giving you a cheaper rate in exchange for you taking on more risk.
It’s always difficult to predict what interest rate environments will look like, but even more so in our current environment of unpredictable trade wars and uncertainty around the U.S. government’s every move.
On one hand, long-term fixed rates are at the lowest that brokers expect to see them in the foreseeable future, making it a good time to lock in.
On the other, analysts still expect the Bank of Canada to drop interest rates by another 75 basis points throughout 2025, which would lead to more savings as a variable rate holder.
The major factor, as always, is your risk appetite. Can you handle a sudden uptick in interest rates? As some brokers put it, a variable rate isn’t worth it if the Bank of Canada’s monetary decisions will keep you up at night.
But if you do have the ability to absorb some increased costs down the road and it won’t weigh heavily on your mind, a variable certainly has the opportunity to save money in 2025.
Mortgage rates sourced by Ratehub.ca. For a comprehensive list of today’s mortgage rates for each term/type, visit: https://www.ratehub.ca/best-mortgage-rates
Ratehub.ca is a mortgage rate comparison marketplace and mortgage brokerage. They help millions of Canadians compare and obtain the best mortgage rates, credit cards, insurance, deposits and loan products.
Rates shown are the lowest available for each term/type and category (insured versus uninsured) as of market close on April 24.
