Home buyers are faced with a tough decision when looking for a mortgage: take a risk on a variable mortgage or choose the security of a fixed-rate?
Variable rate mortgages gained popularity during the financial crisis as the Bank of Canada
slashed the benchmark interest rate to a record low 0.5 per cent, causing variable rate mortgage costs to tumble with it. But now that the central bank is hiking rates, even if the key rate is only at 0.75 per cent, it appears fixed rate products are making a comeback.
An article in the Financial Post
points out that while variable rates are still low, fixed-rate mortgages are looking quite cheap. Jitters around the globe about economic stability and a second bout of recession have caused investors to pile their money back into government treasuries, which means the yields on the bonds fall. Banks use these yields to determine fixed-rate interest rates, and as a result, fixed-rate mortgage costs are coming down. But just how low are they?