Variable Rates Gain Popularity Ahead of Bank of Canada Decision
Canadians are increasingly leaning towards variable-rate mortgages as they await a new announcement from the Bank of Canada. Recent data from Ratehub.ca indicates that variable-rate loans accounted for 14% of new mortgage agreements signed in September. This figure marks the highest share since December 2024.
Growing Interest in Variable Rates
Moreover, two-thirds of individuals contacting Ratehub.ca for rate comparisons are now inquiring about variable-rate products. This shift in consumer interest reflects changing attitudes towards mortgage financing.
Anticipated Rate Changes
Financial markets predict a 95% probability of a quarter-point decrease in the Bank of Canada’s key interest rate during its upcoming meeting. If enacted, this reduction would lower the rate to 2.25%, following a previous cut to 2.5% in September. These adjustments are influenced by an uncertain economic outlook, characterized by slowing exports and growth in GDP.
- September 2024: Variable-rate mortgages at 14% of new contracts
- 95% chance of a rate cut to 2.25% expected
- Previous cut in September 2024 reduced the rate to 2.5%
Market Reaction and Trends
As the Bank of Canada signals potential rate cuts, consumer demand for variable rates is surging. Penelope Graham from Ratehub.ca notes that borrowers are willing to forgo payment stability to take advantage of short-term interest reductions. Meanwhile, Philippe Simard, mortgage director at Ratehub.ca in Quebec, highlights that fixed-rate lenders have also adjusted their offerings in response to changing market conditions.
The lowest fixed-rate mortgage for a five-year term currently stands at 3.79%, which is just nine basis points higher than the lowest variable-rate option. Traditionally, approximately 62% of Canadians have favored fixed-rate mortgages for their perceived stability. However, the current climate may shift this trend, particularly among younger buyers and real estate investors seeking flexibility.
As Canadians adjust their strategies in the evolving mortgage landscape, the dialogue surrounding variable rates grows more prominent. For those with insights or additional information regarding this shift, El-Balad encourages you to reach out via email or call directly at 1-800-63SCOOP.
