Following years of being told that interest rates were on their way up it seems that a great many homeowners in Canada have finally got the message. A survey carried out by CIBC found that those responding to it, aren’t leaning more towards locking in their mortgage rates, but intend to lock them in for a long time.
This survey follows one carried out by the CIBC previously that showed 57% of homeowners in Canada were choosing a fixed rate mortgage if they were acquiring, refinancing or renewing a mortgage now. 30% of these said that they would choose a variable rate mortgage, and therefore risk having pay more when rates did eventually go up.
This new survey shows 74% of homeowners that choose to lock in would opt for a medium or long-term mortgage.
Below are the highlights from the survey:
1. 47% would choose a medium term mortgage (a 3 to 5 year one) if they were acquiring, refinancing or renewing a mortgage now.
2. 27% would opt for a longer-term mortgage (7 to 10 years)
3. 19% would opt for a shorter-term mortgage (1 to 2 years)
The banks are tending to push the idea of locking in for as long as possible. They do this because of course it makes more money for them, the longer the term of the mortgage, then the higher the rates. Since they are already big and have plenty of money then they could afford to borrow at lower rates. They could then make a killing on the difference between what they pay and what we pay.
The banks, along with their economists have been telling us to lock in mortgages for years as the rates languish, and those who have variable rate mortgages (who didn’t heed this) have benefitted from borrow rates that have hit rock bottom.
Beating the bank doesn’t happen often, and can only be done for so long. Those who still have a variable rate mortgage, especially those with large ones are at risk of getting stung because of much higher mortgage payments once the rates begin to rise. By then, then banks being what they are will close the door on low fixed rates. As they say “the fish will be in the kettle.”
As of yesterday (Friday 15th May) RateHub (a mortgage broker site) showed that the best 5 year variable rate was 2.05%, whilst the best 5 year fixed rate was 2.5%.