CIBC 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