Mortgage Rates

fixed-rate and variable-rate mortgage choices for householders


Over the past few months, interest rates have been falling due to the economic impact of the COVID-19 crisis.

Today Butler Mortgage offers a five-year fixed rate of 1.53% and a five-year variable rate of 1.54%.

With falling fixed and variable interest rates, the question is: “Which is the better option, fixed or variable?

The answer is it depends on. It is important to choose the mortgage solution that suits your needs.

Ron Butler was recognized by The Globe and Mail for a recent article on Monday, September 14, 2020, by Mary Gooderham, entitled “Fixed or variable? Repeat the debate at low interest rates“.

Mr Butler stated that the interest rate differentials “are now very small” and that: “A competitive five-year variable mortgage is 1.80 to 1.60 percent, while a competitive five-year fixed mortgage is 1.94 to 1.59 percent, so the spread between the both options is only around 10 to 20 basis points. From this point on, the price advantage begins to collapse. That low profit margin means that most Canadians overwhelmingly choose fixed rates today. “

Fixed rate versus variable rate

Fixed rate mortgages:

The interest rate stays the same over the life of the mortgage, which means you:

  • Predictable
  • Easily budgeted for
  • Convenient set-and-forget

Variable rate mortgages:

There are two types of mortgage where the interest rates vary with the market rate known as the “base rate”:

  • Variable rate mortgage – where rate automatically adapts to changes in the key rate and retains the original repayment schedule
  • Variable Rate Mortgage – If the total payment amount remains fixed, but depending on whether the policy rate goes up or down, the mortgage payment is either towards interest or to amortize the principal

Typically, both adjustable rate and adjustable rate mortgages offer better interest rates compared to fixed rate mortgages.

However, the article states that fixed rate mortgages continue to be the “traditional go-to” homeowner for the reasons stated above.

Homeowners want convenience, something they know, and don’t necessarily want to keep track of fluctuating rates.

However, those who prefer and advocate adjustable rate mortgages point out that if the interest rate outlook shifts, they can switch to a fixed rate at any time.

This raises another important aspect of mortgages … mortgage penalties.

One thing to consider is the penalty for breaking any type of mortgage.

In the article, Mr. Butler stated that “adjustable rate mortgage contracts guarantee a precise penalty limited to three months of interest. Five year fixed rate mortgages can have a far more volatile and dangerous penalty due to interest rate differential calculations.

“Many can get brutal results when charges are up to 4 percent of the mortgage balance – say, $ 16,000 for a $ 400,000 mortgage.”

Even so, Mr. Butler added, “The five-year fix remains the most popular mortgage in the mortgage market today.”

The reality, however, is that many Canadians either want to break or adjust their five-year mortgage before the term expires, e.g. B. because they sell the property, refinance it to get access to equity, or want to take advantage of lower interest rates.

It is very advisable to speak to a qualified and experienced mortgage broker, such as Butler Mortgage, who can do penalty calculations and advise on many other aspects of mortgage solutions.

Are you looking for mortgage solutions during the pandemic?

If you are looking for or owning a home during this pandemic and you are looking for the right mortgage solutions, please do not hesitate to get in touch.

We offer historically low mortgage rates. Talk to one of our expert mortgage brokers to find out where you are today and what your options are.

Avoid poor future financial condition. Avoid confusion. Avoid a headache.

CONTACT US anytime and start the discussion.


Linda Garcia

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