Variable mortgage charge hits report low at sub-1%
Canadian homebuyers now have the option of getting a variable mortgage rate of less than one percent for the first time, according to a rate comparison website.
Ratehub.ca said the best five-year variable mortgage on its website is now 0.98 percent.
The tariff is offered by Ratehub’s in-house mortgage broker CanWise Financial.
The best 5-year fixed rate is 1.74 percent, according to the website.
However, that doesn’t necessarily mean that a floating rate is the best option for all home buyers.
“If you are the type of person who values and would benefit greatly from knowing exactly what your mortgage payment will be over the next five years so that you don’t have to worry about mortgage rates and you can plan carefully , then that type of person should always take a fixed rate no matter what the savings from the variable are, “said James Laird, Co-Founder of Ratehub.ca and President of CanWise Financial, in a telephone interview.
“If you’re comfortable with a little more risk, you won’t worry that your mortgage rate can, and probably will, change at some point during the five-year life of your mortgage – the variable is still likely to save you money. Nine times out of ten, the floating rate is the cheaper option, ”he said.
Mortgage rates plummeted as the Bank of Canada cut its policy rate to a record low to cushion the economy from the shock of the COVID-19 pandemic.
This then caused a stir in the real estate market and drove home prices to new heights.
Laird said these historically low mortgage rates may not last long as the Canadian economy reopens and growth picks up.
“Good news is actually bad news for prices. The stronger our recovery, the higher the unemployment rate, the stronger the economic growth, the more likely the Bank of Canada could hike rates ahead of its current forecast for the second half of 2022. So at some point prime [rates] will rise, ”he said.
However, no matter how low the mortgage rates are, they will not help a homebuyer qualify for a mortgage.
In June, stress tests were tightened for both uninsured and insured borrowers, which means homebuyers must prove they can handle their mortgage payments by at least 5.25 percent.