The wild card in the White House makes mortgage borrowers opt for 'safer' choice

Amid global economic uncertainties, including unpredictable U.S. policies, Canadian mortgage borrowers are increasingly opting for fixed-rate mortgages to ensure financial stability. This shift reflects a broader trend of caution in the face of potential economic volatility.

Data from the Canada Mortgage and Housing Corporation (CMHC) indicates a significant move towards fixed-rate mortgages with terms between three and five years. By August 2023, these accounted for 51% of new mortgages, up from 14% the previous year. Conversely, variable-rate mortgages have seen a decline, dropping from a 45% market share to just 6% in the same period .

This trend is driven by borrowers' desire for predictability in their monthly payments, especially after experiencing rapid interest rate hikes. The Bank of Canada's series of rate increases since March 2022 has led many to seek the security of fixed rates, even if they come at a higher initial cost .

Despite the current preference for fixed rates, some borrowers are still considering variable-rate mortgages, anticipating that interest rates may decrease in the future. This approach involves accepting higher payments now with the hope of benefiting from potential rate cuts later .

Financial advisors recommend that borrowers assess their individual financial situations and risk tolerance when choosing between fixed and variable rates. Factors such as income stability, long-term financial goals, and the potential for interest rate fluctuations should be considered to make an informed decision.

As global economic conditions remain uncertain, Canadian mortgage borrowers are prioritizing financial stability by favoring fixed-rate mortgages. This cautious approach underscores the importance of adaptability and informed decision-making in navigating the evolving financial landscape.