As the Bank of Canada continues cutting interest rates, variable rate mortgages are starting to look more appealing. Variable mortgages — which adjust directly with the central bank’s key interest rate — dealt with some hate when anyone who locked in a mortgage rate under 1% in 2020, 2021 and 2022 got hit when rates spiked to about 5% by mid-2023. But as economists start predicting a drop in interest rates over the next year, variable-rate mortgages are making a comeback. Around 20% of people taking out new mortgages are going for variable rate mortgages over fixed rate, up from just 5% before the rate cuts, according to non-bank lenders. It would still take four or five more rate cuts to make variable-rate mortgages cheaper than the current five-year fixed options, though. If you think analyst estimates are to be believed (though rate cut projections are never guaranteed), a variable mortgage could be right for you.
