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Fixed or variable? Advice from more than 50 brokers for Canadians whose mortgages are up for renewal

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For most Canadians, a mortgage is the biggest loan they’ll ever take on in their lifetime. Following the Bank of Canada’s historic rate hike cycle, the cost of borrowing money has put a significant strain on households from coast to coast to coast.

Over the next year-and-a-half, 44 per cent of all mortgages will be up for renewal in Canada. To help guide consumers through these uncertain financial times, CTV News reached out to roughly 60 mortgage brokers across Canada with a list of questions. Their answers provide professional guidance for individuals and families searching for clarity and sound advice.

Speaking with CTV National News, Toronto mortgage broker Ron Butler points out that “affordability is bad everywhere, if you were close to your budget at your old mortgage rate, you may be over your budget at your new mortgage rate.”

In May 2019, the Bank of Canada’s key interest rate sat at 1.74%. During the pandemic, the key rate dropped to .25%. Today, it sits at a lofty 5.00%.

Tania Bourassa-Ochoa, Canada Mortgage Housing Corporation’s deputy chief economist, has found that “a lot of mortgage consumers are actually facing significant financial stress. There's a lot of indicators that are telling us that borrowers are actually struggling a little bit more than we thought.”

Amanda and Jeff Cooper live in Southwestern Ontario in the small town of Dorchester with their two children. The family of four have outgrown their current home, which is now for sale. They’re preparing to close on a new house they recently bought for their family; though they’re still unsure what type of mortgage is best for their short- and long-term needs.

“I feel like it’s a huge, huge gamble and a risk. Just considering where everything is, not knowing what’s going to happen in five years from now,” said Jeff.

The mortgage rate they secured at the end of 2020 for their current home was 1.7%. Amanda shared that “now we’re looking at mortgages (for their new home) in the range of five per cent. It’s a significant difference for sure.”

  • Return tomorrow morning to CTVNews.ca for the Bank of Canada's next interest rate decision

The couple are now pondering a decision that may have a significant impact on their future financial outlook. They’re leaning towards a short-term, fixed rate, and are working closely with a trusted mortgage broker.

“We’ve gone through both options out there between fixed and variable,” said Jeff, who goes on to add that they’re “running the numbers both ways to see what works best for [their] situation.”

In a nationwide questionnaire to mortgage brokers, CTV News inquired about the best type of mortgage to have right now, and for how long?

(Gary Monson / CTV News Graphics)

Fifty-nine per cent of brokers shared that a short-term, fixed mortgage is currently the right choice to make. Just 7% said variable, and 34% said it depends (based on an individual’s current situation).

For the last 12 months, Butler has been telling his clients “to take a two- or three-year fixed mortgage.” He reasons that “we don’t know how far (interest rates) will go down and we don’t know how fast it will happen; a short-term fixed may be the answer.”

CTV News asked Canadian mortgage brokers if an individual can trust a bank for mortgage renewal advice.

(Gary Monson / CTV News Graphics)

Twenty-nine per cent said yes, 51% said no, and 20% said it depends.

Butler said that banks are in the business of making money. “It is unusual that a bank would give its lowest possible offer at renewal the first time, every time,” he said. “The highest possibility is it will offer a somewhat higher rate and then if you negotiate with them they may come down.”

For those currently stuck in a sky high variable mortgage, CTV News asked brokers across Canada if you should get out of a variable mortgage if you are currently in one.

Nineteen per cent said yes; 49% said no; with 32% feeling that it depends on each individual’s situation.

Ottawa-based mortgage broker Frank Napolitano said if you have a variable mortgage, “you’ve managed to get through the worst of the rates. If all economists are correct and interest rates and the Bank of Canada start to reduce, then best to wait this out for a few more months so you can lock in at a better rate.”

The CMHC is forecasting an interest rate reduction. Bourassa-Ochoa said that by 2026, the CMHC’s “baseline forecast brings us to between 2.5 and 3 per cent. But that said, (interest rates) are still going to be significantly higher than what they were.”

The Coopers are hoping, like many Canadians, for a steady decline in interest rates from the Bank of Canada. “I hope to see them lower, to make life more affordable for everybody,” said Amanda, who has family members who are struggling to purchase their first home.

As for the best rates in the country -- according to the brokers who took part in our questionnaire -- the lowest fixed rate mortgage can currently be found in London, Ont., and Saskatoon, at 4.34%. The lowest variable rate can be found in Toronto at 5.90%.

Butler gives this closing advice to anyone currently looking for a mortgage that best fits their needs: “Shop like crazy. There’s a lot of rates available online, it’s very easy so just shop,” he said.

“Then once you’ve found the best possible answer, don’t go long term. Sometimes the five-year rate will be tempting, but possibly the three-year rate will end up better for you in the long run.”

Visualizations by Charlie Buckley and Gary Monson; Edited by Phil Hahn

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