The rise of the variable rate?
Fixed or variable? It’s a debate brokers thought they left behind but is now coming up more and more as fixed rates climb and concerns about a Central Bank move fade into the distance.
“You’re seeing a one per cent spread between variable and fixed so it almost doesn’t make sense to go with a fixed rate right now,” James Harrison of Mortgages.ca told MortgageBrokerNews.ca. “It didn’t make sense while the fixed rates were historically low; now the discounts on variable rates are getting better and the fixed rates are increasing.”
Ratehub.com took to its Twitter account to shed some light on the topic Monday.
“Earlier this year, 80% of our site users showed interest in fixed rates, but what will happen now with the spread b/w variable rates?” the company mused.
Not every broker is willing to turn his back on fixed rates just yet, however.
“I still think fixed rates are at all-time lows, even though we’ve seen them rise recently,” Mauro Di Cosola of Dominion Lending Centres told MortgageBrokerNews.ca. “In the overall scheme of things I still think fixed rates are the way to go. 3.59, 3.69 per cent isn’t too high. If somebody were to get a five year fixed rate at 3.59 per cent I think they’re still sitting pretty.”
Di Cosola does admit that clients are more willing to consider a variable rate, though; a trend that may be signally a change in attitude.
“I have seen clients tend to look at the variables a little bit more than they otherwise would.”
Of course, every situation is different and the type of mortgage a client depends largely on the client’s priorities.
“It depends on the client wants to have no trouble sleeping at night, I would suggest a fixed rate,” Di Cosola said. “If they want the lowest rate I would be more inclined to suggest a variable rate, in a rising (fixed) interest rate environment.
“No one has a crystal ball so the variable products could go up as well. At least you know what you’re getting when you have a fixed rate: If a client doesn’t like the gyrations of the market, fixed rates give them piece of mind.”