Let’s talk real estate: fixed rates and variable rates

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The Differences Between a Fixed and Variable Mortgage Rate Explained

By Joseph Marovitch

March 10, 2022

I am often asked what is the difference between a fixed mortgage rate and one variable mortgage rate? Variable mortgage rates seem to be lower, so why shouldn’t I take variable instead?

A fixed mortgage rate is an interest rate that can be reserved by the buyer up to three months before the purchase as part of a pre-approval. For example, if a potential buyer is pre-approved for a 5-year fixed rate mortgage at 2.65% on January 1 and buys a property on February 25 when current rates have increased to 3.05%, the pre -approval guarantees the buyer the pre-approved rate of 2.65% for 5 years, even if the current rate continues to increase. The downside is that fixed mortgage rates are generally higher than variable rates, but they are fixed and will not increase as rates go up.

Typically, in good times with a booming economy, interest rates rise and a fixed rate mortgage is usually a better option.

A variable mortgage rate is usually a lower rate. Buyers like variable rates because, in the short term, the interest rate is lower. However, variable rates are variable, which means that the variable rate rises and falls with the rise and fall of Bank of Canada rates. The rate a buyer may have now is 2.50%, but tomorrow it may be 2.80% or 3%. Rates can also go down, as can the buyer’s interest rate, but more often than not rates go up.

Currently, rates have been historically low for the past two years amid the pandemic. However, with the lifting of restrictions and rising inflation, rates are expected to rise. This situation would be a good reason to lock in a lower fixed rate now in anticipation of the expected rise in interest rates.

Variable rates are also usually shorter term, like 1, 2 or 3 years. If a short-term mortgage is required due to circumstances such as a possible move or life change, a variable rate may be more appropriate. Additionally, situations such as wars i.e. Russia/Ukraine, a possible 6th wave of COVID-19 or other natural or man-made disasters are also times when, with uncertain savings, a variable rate may be a better solution.

“If a short-term mortgage is required due to circumstances such as a possible move or life change, a variable rate may be more appropriate.”

Typically, in good times with a booming economy, interest rates rise and a fixed rate mortgage is usually a better option.

I offered a general understanding of fixed and variable rates. There is a lot more to this. If you have any questions, do not hesitate to contact me. I can provide you with further information or refer you to experienced mortgage professionals.

If you have any questions or comments, please refer to the comments section at the bottom of the page. Also, to view past articles, Click here.

Next post: Review the upcoming amendments to the Real Estate Brokerage Act that will come into force on June 10, 2022 – dual representation restrictions for brokers


Market state

Across Canada, from Calgary to Toronto, registrations increased in February, according to a newly published article RBC Report. However, this does not seem to be the case in Quebec, according to the Professional Association of Quebec Real Estate Brokers (QPREB).

A month of increased listings across Canada is not yet a trend, but it is a good indicator. According to the RBC report, the increase in listings may be the result of sellers wanting to sell ahead of the expected increase in interest rates, which will likely lead to less competition among buyers and favor a buyer’s market. Another reason for more listings across Canada is the lifting of COVID-19 restrictions and a re-emerging economy.

“Montreal appears to have increased listings according to Centris results, however, far from the increase seen outside the province… Regardless, demand in Quebec is still high and inventory is still low . The result is a continuous increase in prices.

Montreal appears to have increased its enrollment according to Centris results, however, far from the increase seen outside the province. This may be due to the concentration of real estate in the city where available land is limited for new developments. Be that as it may, demand in Quebec is still high and inventories still low. The result is a continuous increase in prices.
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Other articles by Joseph Marovitch


Joseph Marovitch - WestmountMag.ca

Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families in and around Westmount, hosting children ages 6 to 16 as the owner and director of Camp Maromac, a sports and arts summer camp established in 1968. Using the same strengths for caring for families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those for whom he is responsible, Joseph applies this to his current career as a real estate broker. If you have any questions, do not hesitate to contact Joseph Marovitch at 514 825-8771, or [email protected]


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