A new CIBC poll conducted by Harris/Decima reveals that half of all Canadians said they would choose a fixed-rate mortgage if they had to decide today, a notable increase over last year.
Canadians also expect mortgage rates to be higher over the next 12 months.
These poll findings suggest more Canadians are looking to lock in at today’s low fixed rates as part of a strategy to pay their mortgage down faster.
“The fixed or variable question is one of the biggest considerations for new home buyers and for those holding an existing mortgage, and the low-rate environment this year is one more factor Canadians will need to consider as they choose the mortgage that is right for them,” said Colette Delaney, the executive vice-president of mortgage, lending, insurance and deposit products at CIBC.
Highlights of the poll include:
• Fifty per cent of Canadians said they would choose a fixed-rate mortgage today, compared to only 39 per cent last year.
• Thirty-two per cent of Canadians said they would choose a variable-rate mortgage today, the same percentage as last year.
• Another 18 per cent said they were uncertain which mortgage would be right for them, considerably lower than the 30 per cent who were undecided in 2011.
• Eighty-six per cent of Canadians believe mortgage rates will either stay the same or be higher 12 months from now.
• Only six per cent of Canadians believe mortgage rates will be lower 12 months from now.
A comparison of these poll findings to those from 2011 indicates the increased interest in fixed mortgages may have come mainly from those who were previously undecided as to which mortgage they would choose, while the percentage of Canadians pursuing a variable strategy has remained constant.
Fixed-rate mortgages have traditionally been popular among first-time buyers looking for certainty in their payments as they establish themselves financially. However, this year’s poll shows a fairly constant demand for fixed mortgages across age groups.
One issue Canadians were certain of was the prospect of increasing rates. Nationally, 86 per cent said mortgage rates would either be the same or higher one year from now, a similar finding to last year's poll results.
“While it’s not possible to predict future interest rate changes, it is encouraging to see that the vast majority of Canadians have considered rate increases as part of their mortgage strategy,” said Delaney.
One recent change is the abandonment of the mortgage war begun by the Bank of Montreal. Its 2.99-per-cent five-year fixed closed mortgage expired on March 28.
Royal Bank of Canada and Toronto-Dominion Bank announced they have ended their offer of a 2.99-per-cent rate on a closed four-year mortgage, raising their special fixed-rate by 50 basis points to 3.49 per cent. Both announced their posted five-year closed rates have moved up 20 basis to 5.44 per cent.
In a poll released by CIBC in January 2012, Canadians identified paying down debt as their No. 1 financial priority for 2012, and Delaney noted that low mortgage rates can help Canadians to accelerate their debt repayment.
“With debt repayment a top priority for Canadians, and with rates near historic lows, many Canadians have an opportunity to reach their goal of being debt free sooner,”she added.
Delaney said that choosing the right mortgage depends on your personal financial situation, and there’s no single answer for everyone.
“It is important to view your mortgage as one component of your overall financial plan, which means you can't choose a mortgage purely on rate,” she explained. “The flexibility to make extra payments, your overall interest costs, and amortization all have an impact on your overall financial plan, and you should get advice on your total financial picture when choosing the mortgage that’s right for you.”