Mar 1, 2012
Changing financial landscape a challenge for mortgage industry
Variable rates have been the most popular choice among homeowners between the ages of 35 and 44 according to a report from Canadian Association of Accredited Mortgage Professional (CAAMP). While there is always a risk that interest rates will fluctuate, there are other factors to consider. The greatest advantage is the long-term savings on interest costs. Research has shown that people have saved money on variable-rate mortgages more than 80 per cent of the time.
Although the spreads have been reduced and discounting is disappearing, what hasn’t changed is a home owner’s decision-making process. When variable rates were historically low and fixed rates were substantially higher, many home buyers opted for fixed because they knew exactly how much principal and interest they paid on each regular mortgage payment throughout the term. And for some, having that peace of mind is the determining factor.
So the question of whether going fixed or variable still comes down to what makes a home owner comfortable. However, it’s really a win/win for home owners -- with fixed rates so low, and with the prime rate increasing some time in 2012, the fixed rate may indeed outperform the variable rate, but even if it doesn’t, the extra interest costs on fixed rates will be far less than in past years.