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Fixed-rate or variable-rate?

This is a question that consumers have been struggling with over the past several years while we have been enjoying historically low interest rates. With the Bank of Canada now widely thought to have concluded a series of seven interest-rate hikes in the past year, it's time to assess the two strategies.

Should you choose a fixed or variable mortgage loan? It all depends on your tolerance to risk in the face of interest rate fluctuations. A variable rate is generally more advantageous than a five-year rate on a given date. However, the variable rate may vary in time—as its name indicates—whereas the five-year rate remains unchanged for the entire five-year term. With the variable rate, you benefit immediately from rate decreases, but you may be affected if the rates go up.

Many variable-rate mortgage holders may regret not having locked in at a safe fixed rate, but mortgage brokers say that most of them fare about the same as their locked-in counterparts. By managing the variable rate product, some consumers have been able to pay down their mortgage substantially. Experts now agree that over the past ten years one would have paid less interest by taking a short term or variable rate mortgage versus a longer term mortgage. some people prefer the stability of a fixed rate over the potential cost savings offered by a variable rate. Choose your mortgage carefully. Ask a more broker for help before you sign the deal.

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