Edmonton homeowners are increasingly embracing the uncertainty of variable-rate mortgages as current market conditions make them significantly cheaper than fixed-rate options, according to a new survey from TD Bank.
The survey, which polled prospective buyers and current mortgage holders across Canada, found that existing homeowners are generally worried about renewing their mortgages, while prospective buyers are cautious but optimistic about entering the market.
Steve Ng, senior district manager for mobile mortgage specialists at TD, noted that residents in Saskatchewan and Manitoba were the most confident about renewals and tended to choose fixed rates. However, the situation is different in Alberta.
"Unlike Manitoba and Saskatchewan where 73 per cent of respondents favour a fixed-rate mortgage, 60 per cent of Alberta respondents lean toward variable-rate mortgages," Ng said.
Mortgage expert Penelope Graham with Ratehub.ca said the trend is not surprising. "Activity on our site for demand for variable-rate applications has gone up," she said. "The reason is obvious. Variable-rate mortgages are vastly cheaper today than fixed-rate mortgages."
As of mid-April, the lowest fixed-rate mortgage in Canada was 4.04 per cent, while the best variable rate was 3.35 per cent. This marks a significant shift from earlier in the year when fixed rates were around 3.8 per cent, only slightly higher than variable rates.
Graham attributed the change to the war in Iran, which has increased bond yields in Canada amid concerns that rising oil prices could lead to higher-than-normal inflation.
Despite the growing interest in variable rates, fixed-rate mortgages remain popular across Canada, accounting for nearly 70 per cent of all inquiries. However, variable-rate inquiries have risen sharply from about 10 per cent a year ago to a larger share now.
Edmonton homeowners may be more willing to accept interest rate uncertainty due to the city's affordable housing market, which is among the most affordable major markets in Canada. This affordability likely reduces the financial risk associated with variable-rate mortgages.
