Tag Archive: fixed or variable


Unemployment as a Rate Indicator

People are constantly hoping to time the rate market, despite how ineffective it may be. For the brave souls who try, here’s some interesting research from the U.S. Federal Reserve. One of its economists, Claudia Sahm, has documented a pattern in unemployment data. In her Fed report, she writes, “…Comparing the three-month average [U.S.] unemployment rate to its low over the prior...

How People Choose Between Fixed & Variable Rates

As much as academics advise against it, people (consciously or subconsciously) try to predict interest rates before choosing a mortgage. But, interestingly, they don’t look very far into the future when making these forecasts. “…Households are forward-looking over relatively short periods of time,” research shows. A 2015 international study by Cristian Badarinza, John Y. Campbell and Tarun Ramadorai found that “the...

People are Locking in Variables at Lower Fixed Rates

In a normal universe, people who lock in a floating-rate mortgage lock into a fixed rate. And that fixed rate is almost always higher than their current variable rate. But this is not a normal universe. In the world we now live in, variable borrowers are actually locking into five-year fixed rates that are lower than their current rate. For...

Canada’s Fixed-Variable Mortgage Spread Dives to Multi-Decade Low

If you’ve watched mortgage rates for a long time, you know how unnatural this is. The rate on a mortgage with five full years of locked-in interest expense costs less than the rate on a non-guaranteed floating mortgage with interest risk. In fact, that difference (spread) is the lowest it’s been in decades, based on deep discount rates offered to well-qualified...

Fixed and Variable Rates are Closest Since 2016

The gap between the best 5-year fixed rates and best variable rates is the smallest its been in two and a half years. We’re talking less than 1/8th of a percentage point between them. Depending on the equity a borrower has, folks can even find 5-year fixed rates that are below the best variable rates. What’s Provoking It One reason...

Mortgage Rates Heading South Again

There’s an increasingly ominous vibe to Canada’s economic outlook, and that’s got the market taking rates down another notch. Canada’s 5-year bond yield is seven basis points lower today—to 1.63% as we write this. That’s the lowest it’s been since December 2017. All told, the 5-year yield has now sank 83 basis points since the November high. With the Bank of Canada...

The Fixed-Variable Spread Shrinks Further

A regular consideration when choosing between a fixed or variable rate is the difference between them. As of late that “fixed-variable spread,” as we jargony industry people call it, has been slowly narrowing. So far, it has mostly been a result of diminishing variable-rate discounts. Just this morning, for example, TD hiked its advertised variable rate a head-turning 20 bps....

The Odd Spike in Insured Variable-Rate Mortgages

Something unusual has happened in the high-ratio mortgage world. Homebuyers with less than 20% equity are gravitating to floating-rates — more than ever in recent history. New data from the country’s top default insurer (CMHC) shows that almost a third of transactionally insured borrowers (31.3%) chose a variable- or adjustable-rate mortgage from July 1 to September 30. Jargon-Buster: “Transactionally insured” just...

Variable Rates Maintain Appeal, Despite Higher Rates

Despite higher rates, a healthy slice of our population is staying open minded to variable mortgage rates. A CIBC poll today finds that: 72% of Canadians expect rising interest rates over the next 12 months (26% think they’ll stay the same) An overwhelming 83% of Canadians favour “predictability and stability over risk” when it comes to their finances (unsurprisingly) 77%...

The Bank of Canada May Do You a Favour

The market is betting on rates heading higher this Wednesday. That’s bad news for mortgage shoppers. Or is it? One could argue that a rate hike on July 11 makes the fixed or variable rate decision even easier. Essentially the Bank of Canada is doing mortgage shoppers a favour. Here’s why… Closer to the Finish The higher rates go, the...