Nearly Half of Canadian Borrowers Still Favor Variable Mortgage Rates
In a surprising trend, nearly half of Canadian borrowers are continuing to choose variable mortgage rates, even as economic indicators point to potential rate hikes. According to data from Dominion Lending Centres Inc., a leading mortgage originator, 47.1% of prime borrowers have opted for variable rates so far this month. This decision comes at a time when crude oil prices are hovering near $100 per barrel, a factor that could exacerbate inflation and push fixed mortgage rates higher.
Market Dynamics and Inflation Concerns
Mortgage rates have remained stable recently, but markets are closely monitoring oil prices, which have been holding rates captive for over a month. The prolonged elevation of West Texas Intermediate (WTI) oil prices is expected to worsen inflation, likely leading to increased fixed mortgage rates. Despite these risks, more than four in ten Canadians appear undeterred, choosing variable rates that offer flexibility but come with significant upside risk.
Robert McLister, a mortgage strategist and editor of MortgageLogic.news, notes that variable rates have their advantages. "Variables have their moments, if you want flexibility with gentler prepayment penalties," he explains. However, he cautions that floating-rate discounts are currently stingier than usual by historical standards, meaning borrowers are not only taking on rate risk but also paying a premium for the privilege.
Current Leading Variable Rates
For those considering variable rates, several lenders are offering competitive options. Here are some of the leading rates available:
- Butler Mortgage: 3.30% insured (available in Alberta, British Columbia, and Ontario)
- RateHub: 3.35% insured (national availability)
- Steinbach Credit Union: 3.45% uninsured (available in Manitoba)
- Citadel Mortgage: 3.69% uninsured (national, excluding Quebec)
These rates reflect the current market conditions, where borrowers must weigh the benefits of lower initial payments and prepayment flexibility against the potential for future rate increases.
Expert Insights and Future Outlook
McLister emphasizes that while variable rates can be advantageous in certain scenarios, borrowers should carefully assess their financial situation and risk tolerance. The ongoing uncertainty in oil markets and inflation trends could lead to volatility in mortgage rates, making it crucial for consumers to stay informed. As the Bank of Canada considers potential rate hikes, the choice between variable and fixed rates becomes increasingly significant for Canadian homeowners.
This trend highlights a broader shift in borrower behavior, with many prioritizing short-term flexibility over long-term stability. As economic conditions evolve, it will be essential to monitor how these choices impact the housing market and overall financial health of Canadians.
