Fixed vs variable: It’s the classic rate decision many mortgage shoppers are faced with. And it’s only been made more complicated since the start of the pandemic. Towards the latter half of 2019, variable rates were flying off the shelves with rates as low as Prime minus 1%. A lot has changed since then.

In March 2020, fears over the COVID-19 pandemic and the subsequent lockdown forced most banks and other mortgage lenders to cut rates. Fixed rates went from 3.95% to 2.45% within the span of just one month. At the same time, variable-rate discounts were scaled back to just Prime minus 0.15% to 0.25%. By the summer fixed rates were setting historic lows. That led to a dramatic shift in mortgage selection by borrowers.

In a late 2020 BMO survey, a majority of homebuyers (57%) said they would choose a fixed-rate. Among those still on the fence, they admit that COVID has made them more likely to gravitate towards a fixed-rate mortgage. Just 8% said they’d be more likely to choose a variable rate.

Why the shift in mortgage preference?

First, they’re among the most competitive mortgage products on the market. Many believe variable rates have no more room to fall, given that the Bank of Canada’s overnight target rate is holding at 0.25%.

Second, homebuyers are attracted to the stability that fixed-rates offer. They can lock in a rock-bottom rate for five full years, or longer.

The outlook

The Bank of Canada recently suggested that rates won’t be rising until at least 2023, which is when inflation is expected to return to full capacity. Some forecasters, such as those at TD Bank, don’t expect the first-rate hike until 2024. Click here to read more about the Bank of Canada’s recent rate announcement.

With forecasts like that, both variable and fixed could be good options.

Are you in the process of shopping for a mortgage? Undecided whether to take a fixed or variable rate? I can help you understand the pros and cons and offer personalized solutions.

For more on fixed vs variable, click here to read another blog post.

So, call me today and let’s talk!