September 26, 2020

Fixed-rate interest surpasses variable options

By Myke Thomas

CALGARY, AB – More than 40% of prospective home buyers in Canada say they will choose a fixed-rate mortgage when it comes time to buy, according to the 19th annual RBC Homeownership Poll.

The 42% looking at fixed is exactly twice as many as those who would choose a variable rate, says the poll, and it is the first time in four years interest in fixed rates, the typical choice for the majority of Canadians, has edged higher.

It is up 2% from 2011, but still down from the 49% who chose a fixed rate in 2008, due to low variable rates and combination mortgages.

“The popularity of fixed-rate mortgages had been declining over the past few years, but the trend is shifting. Canadians are now looking to lock in at historically low interest rates,” says Claude DeMone, director of strategy for home-equity financing, RBC.

“What you’re currently seeing is a small margin of difference between fixed and variable interest rate offers, so many Canadians are opting for the peace of mind that comes with a fixed rate.”

Six-in-10 Canadian mortgage holders (62%) say they are taking advantage of low interest rates to pay down more principal on their mortgages (up from 57% last year).

The study also found that more than half of mortgage holders (55%) do not think interest rate increases will cause them financial difficulty (up from 49% a year ago).

Getting the “best rate” was the No. 1 reason 56% of Canadian mortgage holders chose their mortgage, followed by 43% of Canadians who say loyalty and trust in their lender are important.

One-third put convenience as an important consideration when selecting their mortgage.

“There is more to a mortgage than simply a low interest rate,” says DeMone.

“Homeowners should make sure their mortgage fits in with their overall financial plan and provides maximum payment flexibility. Life happens and when it does, you want to be able to be nimble and adjust as easily as possible.”

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