Fixed-rate mortgages top variable-rate mortgages

One of the country's big banks says the improvement of the economy has given fixed-rate mortgages an advantage over variable-rate mortgages, according to a report from The Globe and Mail.

Although many mortgage brokers agree with that assessment, others maintain that locking into a fixed rate is not the best option for prospective homeowners.

Given that interest rates are currently at historic lows, they have significantly narrowed the spread between five-year fixed and variable rates, according to a new report from BMO Nesbitt Burns chief economist Douglas Porter and senior economist Benjamin Reitzes.

“While we have in the past supported going variable, and even though short-term rates are likely to remain low this year, current offers on long-term mortgage rates and the improving economic outlook tilt the balance in favour of locking in at this stage,” the authors said in their report.

There are still a select few lending institutions that offer five-year fixed rates as low as 2.99 per cent. This creates a favourable comparison to the rate of around 2.5 per cent offered on some variable mortgages, says David Hughes of Mortgage Group Ontario.

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