“What’s going to limit an increased push for variable rate mortgages is the fact that the government forces clients to qualify at the posted rate,” Kam Brar, a broker with Auxilium Mortgage, told MortgageBrokerNews.ca. “Of course a lot of brokers would like the government to make qualifying easier, but it could be a case of opening Pandora’s box.”
Opening that box could encourage the regulatory floodgates to once again open, encouraging government to further tinker with mortgage rule changes. Something mortgage brokers have been frustrated with in the past.
And while the bond market has forced recent upticks to fixed rates, many brokers still suggest these products to clients due to the stability.
Variable rates will remain extremely low as the Bank of Canada continues to delay hiking its overnight rate, according to broker Ken Priest, but that doesn’t mean clients should shy away from fixed rates.
“Variable would be best for those Canadians who can definitely afford an increase, but fixed are still so low and they provide the security, especially for those who live month-to-month,” Priest, a broker with Mortgage Intelligence
, told MortgageBrokerNews.ca. “(Fixed) rates about ¼% in the past few weeks, but that’s right in line with seasonal trends.
“And any time we’re under 3% for five-year fixed is a great rate. I like the security and I like to give clients the security.”
For his part, Brar agrees.
“Fixed is pretty damn good right now,” he said. “We’re still below 3%, aren’t we happy with that? Remember a couple years ago when BMO came out with its 2.99% fixed-rate mortgage and we thought that was impossible?”
With the gap seeming to widen between fixed and variable rates, is it time for the government to review the tougher qualifying requirements for VRMs?