Canadalend.com has now released its take on the long-term viability of variable rate mortgages, suggesting they represent the safest harbour for first-time homebuyers looking to get into the market.
“While the Bank of Canada has said it wouldn’t raise interest rates until the economy improves, that hasn’t prevented Canada’s big banks from raising fixed mortgage rates; at the same time, economic uncertainty has made variable interest rates even more attractive, since they fluctuate with the overnight rate,” Bob Aggarwal, president of Canadalend.com said. “With mortgage rates expected to remain near record-low levels for the foreseeable future, there is currently no cause for consumers to panic and buy a home just to avoid rising interest rates.”
The Bank of Canada has expressed its intention to keep the overnight rate at 1 per cent for the foreseeable future, which has led many to consider the variable rate a preferable alternative to fixed rates.
And for his part, Canadalend.com’s president believes buyers may be better served to hold off on buying until they are completely ready, financially. While that move may seem counter-productive for a company that makes its profits off placing mortgages with clients, Aggarwal stresses the importance of getting into the market at the right time.
“With some predicting the overnight lending rate might not change until 2015, consumers have a longer horizon to borrow more money, which translates into being able to purchase a more expensive home,” Aggarwal adds. “While it’s important to get a good mortgage rate, it’s also important to get onto the property ladder for the right reasons. With debt at record levels in Canada, some consumers could get in over their heads. After all, interest rates might be at near-record lows, but they will eventually rebound.”