Fixed vs. Variable Mortgages: How Changing Rates Have Shifted the Landscape

Fixed vs. Variable Mortgages: How Changing Rates Have Shifted the Landscape

 

As you consider your options for financing your new or existing home, one of the key decisions you'll face is choosing between a fixed or variable mortgage rate. This decision hinges on your financial goals and your comfort with risk. A fixed-rate mortgage offers predictability and stability, giving you the peace of mind that your payments won’t change over the term of your mortgage. However, if you’re open to a bit more risk in exchange for potential savings, a variable-rate mortgage might be worth considering. Here are some key benefits of a variable-rate mortgage: Benefit from Rate Cuts: Recently, the Bank of Canada made three one quarter cuts to its overnight rate, and more cuts are expected as inflation eases. With a variable-rate mortgage, these cuts could lower your monthly payments, saving you money over time. Flexibility: Variable-rate mortgages often come with more flexible terms and lower penalties for early repayment or switching lenders. If you need to break your mortgage early, the penalty is usually just three months' interest—much lower than the potential costs associated with fixed-rate mortgages. Short-term Financial Advantages: If you’re planning to sell or refinance your home within the next few years, a variable rate could be advantageous. With rates expected to continue falling this year and next, the potential for additional savings is significant. And remember, if market conditions change and rates start to rise, you have the option to lock into a fixed-rate mortgage at that time. This provides an added layer of security, ensuring you’re not caught off guard by unexpected rate hikes. Ultimately, choosing between a fixed or variable mortgage rate depends on your unique situation and financial goals. As a dedicated mortgage professional, I’m here to help you navigate your options and find the best solution—at no cost to you. If you have any questions or would like to discuss your mortgage options further, please don’t hesitate to reach out. You can contact Karen Monteiro, Principal Broker with Mortgage Alliance Greater Golden Horseshoe, at 519-590-6847 or via email at karen@maximumresults.ca. Let’s work together to determine which option is best suited for your unique needs.