It’s one of the most agonizing decisions homeowners make: Do you go fixed or variable? Mortgage, that is.
The decision could end up costing – or saving – big bucks on what is often the single biggest purchase many will make. Research shows that, in the past, a variable-rate mortgage has been cheaper than a fixed-rate one.
But today’s market is different from decades past in two big ways.
“The spread between fixed and variable rates is extremely low by historical standards. Moreover, we can no longer rely on a long-term down-trend in rates,” said Robert McLister, a Vancouver-based mortgage planner and editor of the Canadian Mortgage Trends blog. “Given all that, the historical advantage of variable is less applicable today.”
It can be confusing for homeowners. Both interest and short-term mortgage rates are sitting at rock-bottom lows. But inflation is the wild card here. Statistics Canada reported on Friday that the core inflation rate has climbed to 2.2 per cent – its highest level in nearly three years.
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