With 70 per cent of homeowners needing to renew their mortgages this year, many are wondering if it's better to lock in with a fixed rate or take a chance on a variable rate.
Ballantyne is in the same boat as the vast majority of mortgage borrowers nationwide who took advantage of lower interest rates during the COVID-19 pandemic and will see their payments increase regardless of the Bank of Canada's decision.According to the Canadian Mortgage and Housing Corporation , the lowest discounted five-year fixed rate was 1.39 per cent at the height of COVID-19 in 2020, compared to 4.79 per cent today.
Bank of Canada governor Tiff Macklem has said a rate cut is within the realm of possibilities, but that the decision will be guided by the economic data. He has said the central bank is seeing what it needs to see but wants to see it for longer to be confident that progress toward price stability will be sustained.The annual inflation rate for April came in at 2.7 per cent compared with 2.9 per cent in March.
If the Bank of Canada does not cut interest rates on Wednesday, it's widely expected to do so next month instead.CMHC says more than 70 per cent of existing mortgage borrowers in Canada have fixed rates which will be up for renewal within the next three years. “So for this year, 2025 and 2026, we’re expecting at least over two million more mortgages to be renewed,” she said.
According to the CMHA, several leading indicators such as higher financing interest rates, elevated housing costs and rising costs of living suggest an increasing number of mortgage consumers are experiencing significant financial pressure. Right now, Alberta’s mortgage delinquency rate sits at 0.28 per cent, which is much higher than the national average.
“But if you're a buyer that's sitting on the fence waiting for those rates to decrease, you might regret that choice only because the house prices aren't decreasing. So once the rates drop, all the buyers on the fence are hopping off, getting into that market making it even harder to get the home at list price.”
For example, Uthe says a Calgarian with a variable mortgage could be paying around the 6.2 per cent range right now, whereas someone on a fixed term could be paying in the range of five per cent.