The mortgage market continues to present a very narrow spread between fixed rates and variable rates and as a result, more and more consumers are leaning towards fixed rate mortgage decisions going forward, or at least that’s what the latest survey data would seem to be indicating.
RBC’s April, 2012 survey states that there are twice as many people now that are prepared to sign up for a fixed rate mortgage than a variable rate mortgage.
This follows CIBC’s March, 2012 survey that found half of all Canadians polled would select a fixed rate mortgage over a variable rate.
The longer the current market dynamics stay in place with respect to fixed and variable pricing spreads, the stronger the shift to fixed rates is also likely to be.
That being said, there are still a good portion of hard core variable rate borrowers who have taken advantage of lower variable rates for a long period of time who most likely will keep with their strategy until rates ultimately force them to rethink the approach. And its hard to argue with those that swear by variable rates as they have provided considerable savings for more than a decade now.
Fixed rates have some additional benefits to the overall market as well.
First of all, a movement to more fixed rate mortgages leaves the mortgage market as a whole less vulnerable to sudden rate increases where borrowers on tight incomes would not be able to cover off their mortgage payments or make significant enough adjustments in their spending quick enough to deal with a sudden and significant rate increase which is always possible.
Second, mortgage lenders actually have the potential to make more money with fixed term rates as compared to the razor thin margins that can be associated with variable rate products.
So a movement to fixed mortgage rates in many ways could be viewed as a win, win, win situation.
Time will tell how all of this will play out, but the recent trend is showing growing popularity in fixed rates and there is no reason right now to think that this trend will not continue to grow in the months ahead.
If you’d like to better understand your fixed rate versus variable mortgage rate options for a home purchase or a mortgage refinancing, We suggest that you give us a call and go through the available options with a member of our team.