credit and debt
A CHANGING OF THE GUARD? Historically, Canadians have preferred the predictability and security of fixed rate mortgages, but with variable mortgages gaining momentum, rising rates may have greater ramifications.
Variable interest rates have always played a part in the Canadian economy, including on savings accounts, car loans, and home equity lines of credit. Variable interest rate mortgages, however, have historically made up a small proportion of the residential mortgage market. Entering the pandemic, variable rate mortgages accounted for 18% of all outstanding mortgage funds in Canada. That has now almost doubled to 33% today, as Canadians’ appetite for variable rate mortgages has grown of late. So far in 2022,
variable rate mortgage funds advanced in Canada have exceeded fixed rate mortgages (53% vs. 47% respectively) for the first time. With the majority of borrowers to-date in 2022 choosing to eschew the security of a fixed rate mortgage for the risks (and rewards) of a variable rate, it means that substantially more Canadians will feel the impacts of rising rates in the short term, instead of just at renewal time. With uncertainty around the magnitude and timing of future increases, how much this impacts those variable rate borrowers remains to be seen.
CANADIANS ARE FIXED ON VARIABLE RATES
$70
variable rate mortgages 49%
variable rate mortgages 20%
$60
$50
$40
$30
$20
$10
$0
FIXED RATE YEARS
FIXED RATE YEARS
VARIABLE RATE
SOURCE: STATISTICS CANADA. TABLE 10-10-0006-01 DATA: MORTGAGE FUNDS ADVANCED BY TYPE, MONTHLY, CANADA
26
rennie.com
Made with FlippingBook - professional solution for displaying marketing and sales documents online