Alberta brokers prefer variable-rate mortgages to fixed-rate ones as the Bank of Canada hikes interest rates


Variable mortgage rates are rising again as the Bank of Canada raised interest rates to 1.5 percent on Wednesday.

For first-time homebuyer Bryce Ellert, however, the hike isn’t a problem, at least not yet.

“We set our mortgage rates about a month and a half ago when they were a little lower, so we’re still looking pretty good,” Ellert said.

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Ellert moved to Calgary from Saskatchewan with his wife and his company, Furnace Fellas, last year. With a baby on the way, they then took the biggest step of their lives and bought their first home last month.

His concern at the time was the short time homes stayed on the market, along with rising costs.

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“We didn’t think we would ever afford anything and we were kind of scared of missing out,” he said.

Ellert is not alone.

According to a recent study by Chartered Professional Accountants, about half of Canadians who don’t own a home believe they never will, while the remaining 50 percent have hope.

However, 90 percent of all respondents state that rising interest rates are a major problem.

Quantus Mortgage Solutions owner-broker Paul Bojakli said he still prefers it to a fixed-rate mortgage despite the rise in adjustable rates.

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“Today is a perfect example,” says Bojakli.

“I get a lot of calls saying, ‘Should I lock up?’ And my answers are the same, no,” he said. “Ride it, the pay is even lower. In some cases it is two percent less.”

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According to Bojakli, variable mortgage rates are currently 2.8 percent. This is offset by a five-year fixed interest rate that could vary between 4.29 and 4.99 percent.

Bojakli says that when qualifying buyers, brokers will anticipate rate hikes from the Bank of Canada — calculated using the stress test — showing what an applicant can afford to buy up to 5.25 percent.

“You’re there. You’re already primed for those hikes, but remember it’s going to be more expensive to maintain your home,” said Bojakli, who expects rising interest rates to cool the housing market.

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However, A-Team ReMax First broker Tom Albrecht said he had already seen the market cool down slightly earlier this year, but added that it remains hot with inventory low.

In Calgary, prices remain high, with the average home selling for $596,500 in May.

“There are various factors that determine value over the long term, and interest rates are one of them,” Albrecht said.

“Oil prices are different and those two factors are in very different places right now.”

Albrecht does not expect today’s BOC announcement to unduly impact Calgary’s market.

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“The impact of today’s hike, sometimes it gets busier in the beginning and then two, three, four months later, is when we see demand drop off,” says Albrecht.

“We’ve seen it slow down in the last month or so, but that’s due to announcements made about three months ago.

“It will be a process, it just takes time,” he concluded.

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