January 10, 2025
As of January 2025, Canadian homeowners and first-time buyers face a pivotal decision: choosing between fixed and variable rate mortgages. This choice is influenced by recent economic shifts, including the Bank of Canada's interest rate cuts in 2024, which have led to a decline in both fixed and variable mortgage rates.
Fixed-rate mortgages offer stability, locking in an interest rate for a set term, typically five years. This ensures consistent monthly payments, shielding borrowers from potential rate increases. Given the current economic climate, fixed rates have decreased, making them an attractive option for those prioritizing predictability in their financial planning.
Conversely, variable-rate mortgages fluctuate with the prime rate, which has been on a downward trend following the Bank of Canada's rate reductions. While variable rates are currently higher than fixed rates, they are expected to decrease further, potentially offering cost savings over time. However, this comes with the risk of future rate increases, which could lead to higher monthly payments.
When deciding between fixed and variable rates, consider your financial situation, risk tolerance, and market outlook. If you value payment stability and prefer to avoid the uncertainty of rate fluctuations, a fixed-rate mortgage may be suitable. On the other hand, if you're comfortable with potential payment variability and anticipate that rates will continue to decline, a variable-rate mortgage could be advantageous. Consulting with a mortgage professional can provide personalized insights tailored to your circumstances.
Source: Reuters