Mortgage Rates, Fixed or Floating? Picking the right mortgage rate is easier than you think !


For many Canadians, a home is their biggest asset and with that usually comes the biggest debt and largest monthly payment.   Your home is a place of long term security and over & above the upkeep costs, the mortgage is the biggest pain point.

Interest rates in Canada are at an all time low – not as low as 2017 but here’s a reality check: The only time the prime lending rate has been even close to this low is in the 1950’s. Going forward interest rates are only forecast to rise.  So if your mortgage financing is coming due for renewal here are my thoughts..

The big picture is first.   The interest rate is second.

First.  Ask yourself how long you expect to be a homeowner.

If you’re fairly certain that your circumstance means you’ll expect to own real estate for the long(er) term, then seriously consider locking in a rate now to achieve long term interest rate stability and monthly payment consistency.   Even if you upgrade or downsize the home, most lenders will allow you to take the financing with you to your next address rather than force a payout and trigger unpleasant prepayment penalties.

Secondly, do not get caught up in whether the rate is .10 or .25 lower for a shorter Term.

In the bigger picture, this will not make a significant difference to your long term financial plan. Lock in the financing for the period of time you need mortgage payment stability with 5 years being a reasonable maximum.

A comment on a floating rate. If you’re the type of person who has historically gone with a floating interest rate then you’ve enjoyed financing flexibility and made more progress on repaying your mortgage through years of falling rates than those who have locked in. However, with all signals pointing to interest rate increases in the months to come (there were 2 in 2017) and interest rates being at an all time low, consider locking in your mortgage rate.  Stable payments at a historic low rate is still a winning strategy.

If you’re an investor who has an appetite for risk in your portfolio, that’s fine. However, there are a few places where minimal risk is appropriate.  Mortgage financing in addition to other long term financial commitments like LIFE Insurance and Retirement Savings is one of those.

Once you’ve locked down your mortgage with a comfortable monthly payment you can plan with confidence for your other financial priorities.

Not sure what kind of rate you currently have? Use the Red Seal Mortgage Worksheet to find out.

The mortgage option you choose depends on your risk tolerance and how long you expect to own real estate. Unsure of whether to Lock in your mortgage or Let it Float?