Mortgage brokers reveal the truth
Interest in variable rate mortgages has held steady amid the Bank of Canada’s consecutive interest rate hikes this year, according to some mortgage brokers interviewed by BNN Bloomberg.
Leah Zlatkin, a Toronto-based mortgage broker and expert with LowestRates.ca, said some of her clients are still choosing the variable rate option because they’re anticipating rates will start lowering by 2023.
“The strategy most of my clients are opting to pursue is either they set up a variable rate, like a five-year variable and they’re waiting to see if lower rates come out in the spring of this coming year and [if not] hopefully jump ship on their variable and move to a lower rated product,” she told BNN Bloomberg.
Clinton Wilkins, team leader at Halifax-based Clinton Wilkins Mortgage Team, made a similar observation regarding the popularity of variable mortgage rates and noted how he hasn’t really seen people switch from a variable mortgage to a fixed product despite higher interest rates.
Wilkins told BNN Bloomberg that many are still going for variable rate due to “forward thinking that a little bit of pain today will lead to savings down the road.”
“We’re still seeing a lot of new mortgage clients taking the variable today, even after the last Bank of Canada increase earlier this month,” he said.
Will rate hikes soften in 2023?
The Bank of Canada enacted its final rate hike of the year on December 7, increasing the key policy rate by 50 basis points to a historic peak of 4.25%. This increase came without the central bank’s usual statement that rates would need to increase further.
“Looking ahead, the Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target,” the bank said.
Considering the more optimistic tone of this statement, James Laird, co-CEO of Ratehub.ca and CanWise Mortgage Lender, told BNN Bloomberg that more people are looking to take on variable rate products “because of course it’ll adjust down if rates drop.”
However, he also noted that variable rate mortgages are best suited for households that “can afford increased exposure to risk” in case the central bank pursues a different route in the coming year.
“Hopefully those people who were in variables this year fit that profile because if they didn’t, it’s been a tough year,” he added.
Last week, Laird told Canadian Mortgage Professional that the BoC’s December 7 statement signalled that its rate hikes are coming to an end.
“The way I read it, they remain concerned about most things: inflation, [whether] it’s entrenched, supply chain,” he said. “But then they finished the announcement by saying, ‘But what we’ve done so far might be enough to take care of all these things that we are unhappy with.’”
