Variable-rate mortgages are making a surprising comeback in Canada as more homebuyers believe that interest rates have peaked. For the past year or so, many experts believed in Fixed-Rate Mortgages, but recent data tell a different story.
Bank of Canada
The Bank of Canada has been actively raising the interest rate; however, for the past 8 months, we have seen fewer hikes, as BoC indicated that further changes would depend on economic data. Some experts believe the Bank of Canada will hold rates steady as the Canadian economy faces uncertainties, including a weakening labour market and GDP. Some Major Banks also forecast the rates might start decreasing as soon as the second half of 2024.
Variable Rates Gain Popularity Again
Variable rates have always been a riskier option for borrowers. On the other hand, variable rate was historically a go-to product due to flexibility and sometimes economic wins. However, this changed with the rapid rate hikes by BoC, which made more borrowers go for a fixed rate to protect against further increases. The good news is that some Canadian consumers now believe that interest rates have hit their high point. It is making them to consider variable-rate mortgages again. With fixed and variable rates nearing, the gamble is that the overnight rate will decrease during the mortgage term, resulting in long-term savings.
In conclusion, variable-rate mortgages might see a surge in Canada as consumers and economists bet on interest rates having peaked. If you are currently on the market looking for borrowing options, we invite you to book a complimentary call with IK Financial mortgage agents. Visit ikfinancial.com to get started.
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