Variable-rate products are gaining popularity. Here’s why

As 2023 comes to a close, a new trend is emerging in the mortgage industry. Variable-rate products are gaining popularity once again! This is largely due to Canadians’ expectations of what is to come next year in terms of interest rates. Here’s what you should know as we head into 2024.

A recap of the Bank of Canada’s busy year 

The Bank of Canada was very busy in 2023, often keeping Canadians on their toes. Between the eight scheduled interest rate announcements, the bank raised rates three times. Today’s overnight rate of five per cent is its highest point in years. This means home owners’ mortgage payments are also at all-time highs. However, the bank has expressed satisfaction with current inflation trends, resulting in a hold to current rates. There are high expectations that the next interest rate change will be a rate decrease.

Why have variable products become popular again?

In the last few weeks, we have seen an uptick in the popularity of variable-rate mortgage products. The most common transactions for variable products are high ratio or insurable mortgages at a 65 per cent loan-to-value ratio. This spike in popularity is due to the economic slowdown we are experiencing and the expectation of a recession, which will prompt the Bank of Canada to lower interest rates. Once the bank cuts rates, those with variable-rate products will enjoy lower rates as well. On the other hand, home owners with fixed rates will maintain their current rate. 

Should you consider a refinance?

If variable rates are going to drop in 2024, should you consider refinancing your mortgage? This depends on a couple of factors. While lower rates are appealing, there are other aspects of your mortgage to consider. For example, you must ensure you will be saving more than you will have to spend to break your current mortgage term. If you enjoy predictability and stability with your mortgage payments, a fixed product is also often a better bet. This ensures you always know how much you owe with each installment. 

Get in touch with a broker!

If you have any questions or concerns about your mortgage as we move into 2024, it’s very important to reach out to a broker. Even as rate hikes come to a halt and start decreasing, home owners are still dealing with high mortgage payments. Many Canadians will also experience a bit of shock come renewal time, as their renewal rate will be higher than their current rate. Rate cuts may soften the blow somewhat, but home owners should expect their renewal rate to be on the higher end.

Navigating the mortgage and housing markets in 2024 can be tricky. However, you can always reach out to a mortgage broker to ensure you are on the right track! We are here to help you with all of your mortgage needs so you can have the best market experience in the new year.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.