- Prior to 2020, an overwhelming majority of the Canadian population preferred a fixed mortgage. Due to the historically low prime rates during the pandemic, the trend shifted. As prime rates continue to hike at every Bank of Canada (BoC) revision, are buyers and refinances leaning on a fixed rate again? What are your observations?
A. Prior to 2020, the approximate number of Canadians opting for a fixed rate would be between 70% and 75%. Given the recent rate hikes and uncertainty in the current interest rate market, I would say that approx 85% are opting for fixed rates in their purchases and refinances.
This doesn’t necessarily mean a 5 years fixed; many of our clients are opting for 2-3-4 year fixed terms. They have a variety of projects that require different timelines and are more inclined to move then the previous generation. Moreover, they do not want to be locked in for 5 years and risk paying a penalty to the bank. We also provide hybrid mortgages which is essentially a combination of fixed-variable mortgage segments within a Home Equity Line of credit product.
Q. What needs to happen for consumers to regain confidence in the real estate market?
A. • Rates; a stable rate environment (which would mean inflation is under control)
• Supply; government needs to spend on new housing projects, La Presse recently reported that Quebec alone needs around 620,000 new properties to fulfill demand
These two elements would contribute to improved consumer confidence and a sustainable residential real estate market.
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