Mortgage borrowers betting on variable rates amid uncertain economic outlook

“Mortgage rates [have increased] a couple of times over the last three weeks, four weeks. I think people are now probably looking at it like, ‘OK, this is the playing field.’” — Justin Prasad, Financial Advisor at BlueShore Financial

Justin Prasad from BlueShore Financial explains that as the Bank of Canada held rates steady recently, variable-rate mortgages have become increasingly attractive for borrowers. With seven consecutive rate cuts behind us and expectations of further reductions—possibly another 50 basis points by September—many Canadians are betting on variable-rate products to outperform fixed rates. He notes that five-year bond yields, which underpin fixed-rate mortgages, remain volatile and unlikely to drop significantly soon, making the variable-rate option more appealing.

Key Takeaways

• Shift to variable rates: 42% of new mortgages were variable-rate by February, up sharply from prior years when fixed rates were preferred
• Uncertain fixed-rate outlook: Bond yields remain unpredictable, with no clear downward trend, while variable rates reflect central bank moves more directly.
• Borrower strategy: Prasad recommends variable-rate borrowers watch future rate cuts and consider switching to fixed later if yields fall.
• Economic backdrop: Continued trade turmoil and roadmap uncertainties around interest rates have led borrowers to seek adaptable mortgage options.

In sum, BlueShore Financial’s Justin Prasad highlights a growing tendency among Canadian borrowers to embrace variable-rate mortgages amid economic uncertainty, viewing them as a flexible and potentially more advantageous alternative to fixed rates, especially when paired with vigilance around future rate decisions.

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