Seventy-seven per cent of Canadian homeowners have fixed-rate mortgages, but only around half – 54% – of those planning to become homeowners would choose this type of mortgage, according to the results of a CIBC poll released this week.
This is in spite of the fact that 83% said they value “predictability and stability over risk” when it comes to their finances. As well, 72% of those polled predicted interest rates would increase over the next 12 months, and they were correct; yesterday, the Bank of Canada increased its overnight interest rate 25 basis points to 1.5%.
The reasons for choosing a variable rate differ.
“Choosing a variable rate mortgage can make a lot of sense for those with a smaller balance on their mortgage or on the cusp of being mortgage-free,” said CIBC’s senior vice-president of mobile advice Tracy Best.
“But if you're a homeowner with other debts linked to variable rates, you could be more sensitive to rate fluctuations, and may want to look at locking in for greater predictability on this part of your financial portfolio.”
According to the poll results, 19% of Canadians would choose a variable-rate mortgage, and 26% were undecided.
According to the poll, the average Canadian homeowner holds around $170,000 in mortgage debt. A 25-basis-point increase on this amount would lead to a jump of around $22 per month for the average holder of a variable-rate mortgage.
According to the poll, 22% of those aged 55 or higher still have mortgages, with an average balance of $112,600. Almost half (47%) of those said they expect to carry that debt past retirement, while 22% said they expect to be mortgage-free within the next five years.
The poll did not break down results by province or city.