Rates aren’t as high as you think

Fixed-Rate Mortgages in Canada

The most popular mortgage rate in Canada (accounting for nearly 50% of all mortgages) is the 5-year fixed-rate mortgage.

And while undoubtedly you’ve sat around a dinner table with friends who’ve griped about their high rates, the 5-year fixed rate is not at an all-time high:

As you can see in the above chart, the current 5-year fixed rate is significantly lower than the historical average of 7.55%.

What does this mean for home buyers?

So, what does this mean for you as a home buyer?

The rate type you choose is often related to your financial situation, but also depends on your comfort level with the ‘risk’ of changing rates and payments. If you’re staring down the barrel of mortgage panic, read these tips on how to reduce mortgage stress.

A fixed-rate mortgage is set at the beginning of your term (in the above case, 5 years) and your payments remain the same until it’s time to renew. This offers interest and payment stability over the term, and while it may cost more in interest, it’s often considered the safer bet for those who want a consistent payment.

When to choose a fixed-rate mortgage

Consider the risk level of starting out with your first home and any other big savings goals you may have. Or, if you don’t have much wiggle room in your budget, a fixed-rate may be the perfect mortgage to avoid any financial risk exposure. Typically, younger or more risk-cautious clients tend to opt for fixed.

Your rate choice can come down to three questions:

1. Can your budget handle a 2-4% increase in your mortgage payments if the prime rate climbs?
2. Do you plan to sell within five years, or will you want options to pay off your mortgage entirely?
3. Will you sleep at night, knowing the risks involved with a variable rate?

Need help understanding whether a fixed rate is the right choice? Get in touch and we’ll walk you through questions just like these to find the right rate for you.