Canadians predict rising mortgage rates

March 26, 2012 | Last updated on March 26, 2012
2 min read

The majority of Canadians (86%) expect mortgage rates to be higher over the next 12 months, while half (50%) would choose a fixed rate mortgage if deciding today, according to a CIBC Poll conducted by Harris/Decima.

Comparatively, only 39% of Canadians showed interest in fixed-rate mortgages last year, and these new findings suggest that more Canadians are looking to lock in at the currently low fixed rates as part of a strategy to pay down their mortgages faster.

The percentage of Canadians who would choose a variable-rate mortgage did not change from 2011, remaining at 32%.

“The fixed or variable question is one of the biggest considerations for new homebuyers and for those holding an existing mortgage.” says Colette Delaney, executive vice president of mortgage, lending, insurance and deposit products at CIBC. “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.”

The increased interest in fixed-rate mortgages seems to have come from those who were previously unsure of which mortgage to choose, with the proportion of uncertain Canadians dropping from 30% in 2011 to 18% in 2012.

In addition, while fixed-rate mortgages have been popular among first-time buyers who look for certainty in their payments as they establish themselves financially, the poll showed a fairly constant and increased demand for fixed-rate mortgages across all age groups.

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Canadians remain certain that rates will increase year-over-year, with the poll results remaining high at 86%.

“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,” added Delaney.

In another poll released by CIBC this past January, Canadians identified paying down debt as their number one financial priority for 2012, and Delaney notes that low mortgage rates can help Canadians to accelerate their debt repayment.

To further accelerate debt repayment, one strategy offered by the bank is to set your mortgage payment at the amount it would be if rates were 1% or 2% higher, with higher payments reducing the principal amount owing and preparing Canadians for increases.

Delaney added 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,” says Delaney. “The flexibility to make extra payments, your overall interest costs, and amortization all have an impact on your overall plan, and you should get advice on your total financial picture when choosing the mortgage that’s right for you.”