Although York University professor Moshe Milevsky still believes variable rate mortgages save customers money in the long run - a point his well-known 2001 study showed - he said current market conditions mean there is more risk involved in these types of products.
"At some point, people have to ask themselves if they can afford the fact that eventually these things are going to go up, whether it's in one year, two years or five years," Milevsky told the Financial Post. The paper said the professor was leaning "somewhat in favour" of a five-year, closed fixed-rate mortgage.
Post columnist Garry Marr saidthe recent risk in variable rate mortgages is tied to the up-and-down discounts and premiums being offered by lenders on these types of products. In addition, he said most of the variable mortgages being sold by banks are closed - and customers will have to pay more if they want an open mortgage they can pay off at any time.
About 25 per cent of mortgage holders in Canada have variable rate mortgages, the paper said.