One mortgage broker is predicting a potential uptick in demand for variable-rate mortgages due to expectations that interest rates will continue to fall.
In July, the Bank of Canada moved to lower its key policy rate by 25 basis points to 4.5 per cent following a rate cut in June by the same amount. Following the move, Bloomberg News reported markets are expecting the Bank of Canada to lower interest rates at all remaining decisions this year amid volatility in the U.S. labour market.
“I think in the next few weeks, we’re going to see a lot of people really starting to switch to variable, especially as the news comes out that we’re expecting two to three more (interest rate) decreases this year,” Leah Zlatkin, a licensed mortgage broker and LowestRates.ca expert, said in an interview with BNNBloomberg.ca on Tuesday.
Zlatkin said she is seeing some clients signing up for variable-rate mortgages and others sticking to fixed-rate products.
She added there are some factors which “savvy clients” are looking at when choosing a mortgage. Zlatkin said this includes the fact that Canadian bond yields have been “quite volatile” and expectations are that fixed rates will continue to trend downward.
She also said people are looking at U.S. unemployment numbers amid fears of an economic downturn.
“We saw a ton of volatility on the stock markets very recently around the world. And again, that makes a lot of consumers fearful that there could be a recession looming,” Zlatkin said.
She highlighted that during economic downturns borrowing costs generally are lowered.
“If you believe that rates are going down as a consumer, and you believe that they’re going to come down hard and fast, which every indicator right now is saying that, then yes it’s a good time to go variable,” Zlatkin said.
However, she added that she takes a more conservative approach herself.
“There’s no blanket recommendation, it’s all about your risk appetite,” Zlatkin said, adding that most of her clients are choosing a three-year fixed mortgage.