Half of Canadians Would Go Fixed, Says CIBC

Fixed-Variable-MortgagesCIBC recently polled 1,000 Canadians on their preference for rate type.

Here are the results (our comments in italics):

  • 50% said they’d choose a fixed rate mortgage today
    (This is up from 39% last year. That’s no surprise, however, given the convergence of fixed and variable rates since September 2011.)

  • 32% said they’d choose a variable rate mortgage today, the same percentage as last year
    (It seems like a meaningful number of those polled were not up to speed on current rates. With the spread between variable and 5-year fixed rates being near historical lows, it’s odd that this many people would still claim to prefer variables. Anecdotal actual statistics don’t seem to jive with this 32% figure. We’ve had three lenders tell us that more than 85% of their volume this year has been fixed-rate business.)
  • 18% said they were uncertain which mortgage would be right for them
    (That’s well below the 30% who were undecided in 2011. The “mortgage IQ” of consumers continues to grow every year, as they voraciously consume mortgage information online. In addition, it’s rarely been easier to choose between a fixed and variable mortgage.)

Despite the hopeless inaccuracy of most interest rate forecasts, many people still let their personal rate outlook guide their mortgage strategy. It’s always worth repeating that the future often doesn’t unfold as planned. In this poll, CIBC found that only 6% of Canadians believe mortgage rates will be lower 12 months from now. Those people may seem like oddballs, but despite the odds being arguably against them, there’s nothing to say they can’t be right.

That said, it’s always wise to prepare for higher rates regardless of your rate view.

CIBC’s Colette Delaney, EVP, Mortgage, Lending, Insurance and Deposit Products, notes that, “While it’s not possible to predict future interest rate changes, it is encouraging to see that the vast majority of Canadians have considered rate increases as part of their mortgage strategy.”

It should be (and usually is) standard practice in mortgage planning to project one’s future mortgage payments at renewal. The idea being to make sure you’re comfortable with this potential payment. Despite any rate expectations to the contrary, most mortgage professionals recommend basing your calculations on rates at least 3% higher.


Study Details: The above data was gathered from a sample of 1,003 Canadians between March 8 and 12, 2012. Harris/Decima says a sample of this size has a National margin of error of +/-3.1%, 19 times out of 20.


Rob McLister, CMT

  1. Asking 1000 people is not a serious poll but a manipulation. I can find 1000 people saying Real Estate is going down 60%.
    I will like to see here more professionalism and not cheap manipulation.
    Thank you
    M

  2. Mike, this forum was not created for dumb, nasty comments. 1000 is a very standard number for this type of opinion polling.
    This is the most professional mortgage blog in North America and any comment otherwise are just stupid.

  3. You are blatantly uneducated on statistical sampling. As Ron suggests, 1,000 respondents is an industry standard and more than sufficient for a valid sample.
    Harris/Decima are not survey amateurs. They are respected and independent and they’ve been around for 25 years. Know your subject matter before commenting.

  4. As long as the 1000 people polled are across the country,and that these people polled represent each market segment.
    Michel

  5. Yes you absolutely can with 95% certainty and a 3.1% margin of error in this case.
    If you have a problem with that then you probably have an issue with statistical polls in general, which is your problem and not others’.

  6. Historically (something like 85% in the last 25yrs) the variable rate has been lower than the fixed. I’ll take those odds any time. A poll is just the sentiment of the people at the moment (sentiment can be influenced by the questions asked). Next year this time it will change yet again. They report that 6% believe the rate will not be lower in 12 months, but how many people believe it will be “unchanged” in 12 months. Has anyone evere read or heard of Edward Bernays? Banks benefit more from having the fixed rate mortgages in the end, not the consumer. This is all spin from the Banks. Stay with the variable!

  7. If you have a prime – .80% variable that’s one thing, but it’s bad advice to tell new buyers to go variable. History doesn’t mean jack in this market. When in history have you seen a 1% overnight rate? If you think rates won’t change then your bet stands to gain you maybe .30%. If you’re wrong, you’ll lose 1% or more. Horrible risk reward.

  8. They’re not “odds.”
    Anyone who wants me to believe that Canada is different from the US has to square it with this; at this time and with these rates, half of those surveyed think a variable mortgage is a good idea.

  9. People hear about their neighbour in a variable at P -.90% and think that by simply picking up the phone today on March 29th they too can get this amazing rate; of course, why couldn’t they – they’re entitled to it…Bill across the street isn’t any better than they are!
    Then they go to their bank who offers them Prime – 0.00% (What the goodness is prime minus zero? …darned bank slang!) and they believe the bank is stiffing them. After all…Bill got 2.1%!!
    Then they go to a broker who says they can get them P – .15% and they think the broker is stiffing them. Cursed brokers! They’re taking me to task for a higher commission!
    Then they go online to a perfectly nice, clean, professional site and rant anonymously about how every financial institution is trying to stiff them and how their friend got such a great rate ‘just the other day’. Then they get a large number of ‘likes’ and ‘thumbs up’ from people with a similar frame of mind.
    Then silly people like me whine about it all – anonymously – on a nice, clean, professional site like this one.
    Sigh…I’m just as bad as they are./

  10. If you can find the details of what the non-response rate was and their methodology for dealing with it then I will shut up.
    Good luck with that.
    Even then it amounts to a guess of
    the the opinion of people that didn’t respond. It is a major flaw in modern surveys that rarely gets mentioned in anyone’s reports. Your faith in Harris/Decima comes across as a little naive.

  11. Mike…in your comment you are very independent and Professional.the others two comments are NOT….”may be a CIBC influence “?…..there is nothing to do against the Power of this 4 or 5 Banks….nothing!! they can do what they want…change Guidelines,kill Mortgage Broker Business….now they are starting to scare citizens ,about possible increase of interest rates of about 2 points in the next year or so…..how come they so good in this predictions….all the industry is a BIG BS…!!!

  12. You’re right John. That’s largely why banks are advertising 5-year fixed “Special Offers” like 4.24% right now, when the true market is mid-to-low three’s.
    It’s also partly why most lenders’ renewal letters almost never have their best rates…

  13. Bank shareholders rejoice!
    To be fair – the banks do have numerous six figure salaries, bonuses, stock options, commissions, buildings, IT systems (servers, phone networks, desktops/laptops/tables, help/support representatives), call centers, fancy marketing campaigns, market research projects etc etc etc to pay for.
    LOL – just kidding.

  14. OK, so let me see if I have this straight.
    We’re supposed to disregard the statistical research of one of the most esteemed polling organizations in Canada, a company that has more survey experience in one month than you’d have in 50 lifetimes, because you–some anonymous poster with God knows what agenda–speculate that it has a sampling bias?
    Spare us.

  15. I do have p-.80.
    What I say is that banks prefer to manipulate clients. Because they can. And here I see a lot of people clapping their hands like children and accepting everything from banks. Why?
    Maybe because as a broker you have to obey to banks rules?

  16. Have you been following the BRIC Nations in the news lately? What do you think will happen to our mortgages if they threaten the status quo of the current Bretton Woods System set up after WWII by the Americans. Take a look at this link:
    http://mobile.slate.com/blogs/the_reckoning/2012/03/30/coming_soon_the_battle_of_19th_street.html
    In economics the term is “ceterus paribus”, but what happens when things are no longer in our favour? Just a thought.

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