Canada's mortgage industry is seeing more Canadians opting for a variable mortgage rate of late. For instance, Canada's largest mortgage originator Dominion Lending Centres Group reports that 47 per cent of prime borrowers took a variable rate in November, a significant jump from 25.6 per cent in August.
Why is the variable mortgage rate gaining traction these days? Right now, typical variable rates go for around 25 basis points less than most fixed rates, which is not a huge spread. Some experts attribute this trend to the view that Canada's economy remains stunted, in which case the Bank of Canada is likely to cut the rates even farther. As well, mortgage shoppers are "...sensing that 2026 holds bigger economic tremors as the U.S. renegotiates our economic lifeline, the Canada - United States - Mexico Agreement (CUSMA). That experience will see Trump dictating terms to us, or maybe even threatening not to renew the agreement at all," explains Robert McLister, mortgage industry expert.
And, historically, variable mortgage rates are thought to offer better value over time. A recent study from York University professor Moshe Milevsky's shows that variables win more than 77 per cent of the time, depending on the assumptions. McLister observes that the current variable surge is due to many, "willing to take a guaranteed small win (a lower floating rate upfront) over an unquantifiable chance of loss," and remain optimistic about BoC rates going lower or if higher, then not by much.
Still, some experts point to the recent GDP growth of 2.6 per cent as a sign of a growing economy which means a halt on further BoC rate cuts. Experts do caution however, that given a relatively small spread between fixed and variable rates, combined with GDP signs of Canada's economic growth, going variable is not necessarily a sure bet. A fixed rate offers predictability with a constant monthly payment for a set term, protecting against sudden rate increases.
Ultimately, the best choice depends on your personal financial situation, risk tolerance, and economic outlook.