Why Would You Choose a Variable Rate Mortgage Right Now?

November 21, 2022 | Posted by: Ron Chan

Why Would You Choose a Variable Rate Mortgage Right Now

At press (Nov 2022) variable mortgage rates are as high as they have been in a dozen years. The thing is, you have plans to buy a home before the fiscal quarter comes to a close, and you've been on the fence about whether to go variable or fixed. Both are neck and neck, respectively, which makes the decision even harder. It needn't be, as if you traditionally prefer the variable rate model, you are picking a great time to buy a home. Why would you choose a variable rate mortgage when it hasn't been this high since 2008? Let's review.

A Very Practical Reason to Get a Variable Rate Mortgage Before 2023 Begins

High Fixed Rates Don't Budge

Fixed rates are exactly that - they don't budge until the end of the term. Like with variable rates today, they are as high as they have been since the recession of 2008. So if you get a fixed rate mortgage before 2022 is in the books, you're locked into higher than normal monthly mortgage payments, no matter what occurs in the Canadian economy in the months to come. 

When it comes to fixed mortgage rates, one should certainly consider 'buying the dip', but unless you're content with consistently (which is what some prefer, regardless) high mortgage payments - variable is currently the way to go. Keep reading for the definitive reason.

What This Variable Rate Chart Tells You

Why Would You Choose a Variable Rate Mortgage

This chart of the variable mortgage rate in Canada since 2006 is very telling. 

The peak at the moment is scaring a few buyers away, but where do you think that peak will go? What goes up, must come down. While it may edge up a little higher before the year ends, the variable rate will invariably drop. What's great about this, is that you're getting a variable rate mortgage when it's high. For a little while you'll be accustomed to a certain monthly mortgage payment. However, soon after, that monthly payment requirement will be reduced. At that point you'll feel a tremendous weight lift off of your shoulders. On the flip side, you may find that you can manage the current (with high variable rates) mortgage payment just fine. If so, you can keep paying what you're paying each month, even when the rate drops, and you'll subsequently enjoy the option to pay off your mortgage sooner than planned. With the recent Bank of Canada prime rate hike (tied to variable rates) being lower than what many expected, don't be surprised to see the prime rate flatten early in 2023, to be followed by a reduction soon after. Whatever the case may be, a high variable rate today is typically followed by a lower one tomorrow. Like we said - practical reasoning.

Contact Winnipeg mortgage broker Ron Chan today at 204.290.9950 with any additional questions you may have.

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