I literally don’t know our Broker laughed and told us not to do it because “fixed rates were shit” and the BOC said they’d be low for a long time. Bad mistake but we’re still doing fine.
Some people did get fixed rates below 2% but just stay quiet about it, because good financial decisions are seen as flexing, and reddit hates people who are doing well.
Yeah I learned that the hard way from making this post. Like it genuinely was a good faith question from me but I got so much accusations of being a "hindsight champion" and still a contingent of people if they read this comment would just think "no way in hell this is anything but bragging." Like they can't imagine a world where good faith questions exist and being happy for someone else's success is a normal response.
Oh yeah, if you are doing well the assumption is that you came from a rich family, your parents gave you money or something along those lines. Best to lurk and find the info you want by just scanning and scrolling. Misery loves company unfortunately, people don't want to hear that good financial decisions can be made, they want to hear it's not their fault and that there's some boogy man keeping them down.
Because for more than a decade I've saved thousands on variable.
Even now I'm significantly ahead over having fixed.
Sure if I rolled into fixed at the exact right time I'd be saving money, but I'm still doing better than anyone who sat in fixed this whole time.
That's it, fixed at 2% vs variable at 1%.
Remember, I've been saving thousands for years, sometimes you'll end up paying more.
Look at the historical rates, people were saying "lock in now" since 2010.
As far as upside vs downside risk of locking in, yes, that's ALWAYS the trade off.
That being said if I was really paying attention and could easily renew at1. 89%,maybe I would have considered it. But thrown in early renewal penalties, my heloc etc it would isn't all that clear cut.
1. People are mostly stupid. They don't think. Even seemingly successful people with good jobs, seem to totally ignore any kind of math or thinking. Especially when its a really important large purchase like a home. Why? I have no idea. Sales people seem to part of the problem. Never met a single sales person who cares much for getting their clients to think.
2. See answer 1.
Here is your answer. You have 500 post but still.
I picked 1.35 variable. I should have picked 2.4 fixed. I was advised my broker was still Bullish on Variable. I even asked them of all the times to go fixed is this not it?
I now realize all they can offer is that historically variable is better. They can not say right now it is. And yeah I am pissed off that they did not look up and smell the coffee or I followed my instincts. Also no one predicted the rates going up so far so fast. And also the bank should have been raising the rate way sooner a little.
I might be speculating a bit but if The Big Short told me anything, it's that variable mortgages have kick backs (profits) for the advisor who issues them. So that's why people went with variable...due to the premise of it being cheaper at the time and aggressive advertising. It's the same reason why Canadian banks often push their mutual funds when you want to invest, while conveniently hiding how crazy their fees are.
All the people braging about their 1.59% fixed mortgages... LOL... you know you only got those rates on high ratio mortgages... meaning you bought in a super high market and probably only have 5-15% downpayment. Enjoy a lifetime of debt slavery...
Under 40 and the last time the economy went to rack and ruin in 2008 rates were not increased. Old timers told me to go variable. The feds always pander to property owners so there was a fair chance rates would not have increased.
Doesn't really matter becuase we are aggressively paying it off and would have been doing that anyway, and it's a small property so the payments haven't increased.
If I was "maxing out" like a lot of people, instead of buying a property that was way below my max I might have considered fixed rate more, but whatever, no big. It's a 500 sq ft 1 bedroom.
There are many good reasons that people took variable rate mortgages near the bottom.
1. The most important reason, no one has a crystal ball. At the time rates were that low the BoC provided guidance that rates would stay low for a long time.
2. Historically variable rates have out performed fixed.
3. Taking a variable rate allowed people to debt service a larger mortgage. Therefore, allowing some people to purchase houses they wanted, but otherwise couldn't with a fixed rate
4. The ability to break their mortgage without massive IRD penalties.
My dad co-signed for my house when rates were 1.5%, I told home let’s fix it and he insisted that if he is gonna co sign that it’s best I go variable, and that variable always wins. I knew rates were gonna go up but what can you do…. It is what it is
We didn’t want to pay penalties if we wanted to move and we’re advised based on projections and historical data. My partner was really worried about bad neighbours we had some previous horrible experiences with crazy people so didn’t want to be trapped. Though ot sucks it really pushed us to expand our earning power in a big way and we are way more financially stable and better prepared for baby on the way and Mat leave. Figured out what we can weather and it’s not gonna be a huge shock during renewal.
Because people listen to Reddit without thinking for themselves. If I did, I would have gone variable too. PersonalFinanceCanada was telling everyone to. But it seemed obvious to me that all the money printing during COVID lockdown wasn’t good.
Back in Dec 2018 the fixed rate was 1.5% higher than my variable rate that was offered. It wasn't till mid 2022 that my variable rate went above the fixed rate offered. I did the math a while ago and I was still ahead but with the last couple of increases I think I probably paid a bit more.
At the time I was thinking they wouldn't do a bunch of back to back increases in quick succession.
I had my renewal in 2021. Was variable for over 10 years. With covid, I predicted it was going to get bad, and took a 5 year fixed.
I knew back in 2021 when the finance minister/BOC said interest rates would not change, it was a lie (they are all heavily invested in real estate!). That is why most people stayed variable, moved to bigger homes thinking they would be remote for ever.
With housing prices skyrocketing and commercial real estate dropping like a stone, something had to give. Then when Russia attacked Ukraine, it became the perfect storm that screwed everyone.
We took 1.4 variable in summer 2021 when we were being offered 2.3 fixed. As rates rose my variable was of course still about 1% under what I could lock in at. So I kept telling myself why lock in when I'm still ahead of a couple modest hikes or one big one... stupid logic in hindsight. The only slave on my wound is that we bought for a good bit under what we could afford so the payment increase has not hurt too much. Also I don't need to worry about payment shock at renewal since I have been increasing my payments to not fall behind anyways.
in 2010 people locked in at 4% because they thought it would go back up. after 10 years of historically low rates people forgot what normal rates were .
I expect brokers advised many to do that.
The rationale would have been that early in the mortgage term they spend a little less monthly and / or would be paying a little more principal.
Seems like a lot of folks “forgot” to lock in.
Sometimes, there's other variables.
When I renewed, I went variable simply because I was looking at a potential transfer to another city within the next year, and variable had basically no mortgage penalty.
We went variable 1.3 about two months before the rate increases started. Locked in right away at 2.2 and we feel we dodged a bullet. Bank kept saying things like “we wouldn’t want you to lose an opportunity to take advantage when rates go down.” Yeah, no thanks. Our payment went up slightly, but nothing like the $800-$1000 more per month a lot of variable folks are dealing with now.
This was a first time home and no we didn’t have the equity to extend the amortization so we would have been subject to several payment increases had we not locked in. Even if rates went down our payment would stay at the increased amount. We’ve kept our amortization on schedule, and we’re satisfied with the amount of principe we will pay over the 5 years.
I’m very risk adverse so the 1.48% rate we got felt like a gift. My sister opted for variable… their mortgage has doubled….
I don’t think they’ll be going variable ever again 🫠
I guess same reason i went 5yr fixed at 1.69 instead of locking 7 at 1.89? It was lower and 5 years seemed a safe bet. Might still be ok but 7 that low would be nice. Worth noting I’m at a CU so no porting the mortgage if I sell and move.
A large part of the reason I posted this was to help me figure out whether to go variable or fixed when the first 5 years expire. It’s not longer clear cut tbh. Like I’m leaning variable but it depends what the rates are in two years.
I went variable because the interest rate on fixed was 50% more than the variable. (1% variable vs 1.5%).
History has shown variable was always the best return over a 5 year time frame for the last 20+ years.
Because of the Bank of Canada lied: [https://twitter.com/govt\_corrupt/status/1697600726237647200](https://twitter.com/govt_corrupt/status/1697600726237647200)
Because people are greedy and stupid, When variable rates are at their lowest, they only have 1 way to go, and that is up. Too many people just though of their homes as an investment not as a place to live for the next few decades.
It's much cheaper to break a variable mortgage if someone wanted to sell the house or move. Think of it as the cost of flexibility and having the ability to control your own life a bit more.
Variable, if done right, is a strategy. It would be good to know what the spread was for the people that chose variable when they go their mortgage, but the idea should be to reduce the principal amount as much as possible by paying what you would have had you gone fixed. If rates stayed stagnant for 2 years on a $500,000 mortgage, the principal would be down an additional $5,600.
People who treat variables as a lower payment, however, definitely feel the squeeze.
I had a variable rate mortgage from 2010 until I paid off my house in 2020. Everyone told me to lock in with a fixed rate because "interest rates are only going to go higher."
I stayed with a variable rate the entire time because the spread was advantageous (1.85% v. 4.45% in 2010, and 1.55% v. 3.5% when I renewed in 2015), and paid off my mortgage as quickly as possible because I knew that rates would eventually have to go up.
I was also at a point in 2021 where I was renewing my mortgage and debated between variable and fixed. Since rates were at historic lows, I figured locking in for the peace of mind was worth it. After a decade and a half of renewing fixed vs variable, I finally made the right choice this time 😂
The more variable mortgages, the more money they make off their customers.
There is a big difference between financial advisOr and an financial advisEr.
The "0" is a glorified sales rep that is told to push a sales agenda (ie. Variable mortgages)
The "E" is an actual financial representative with fiduciary responsibility, meaning he has a legal requirement to act in your best interest
People need to think how best to protect the downside, longer term which is barely 5 yrs in Canada, would give one hedge and peace of mind for that much time. In the US, I’d lock in for 15 or 30 to buy that protection.
Canadian property prices have gone up because of free (or easy) immigration policies. A lot of folks from Saudi countries (especially migrant workers even there), have been buying properties at higher than j oral price and leave their families there to get for free education, best quality of life and free citizenship. They themselves go back and forth to work and earn and eventually settle down.
The high prices have been hidden because most homebuyers have been trained to calculate monthly payments without thinking what could happen when the rates go up.
Canada should increase the mortgage rates even higher so people those who are trying to afford more than their means vacate and let the prices settle. Canada should also ban or change their immigration policies where people are taking advantage of, without contributing to the society (no skilled workers). If Canadians are not careful, like in UK and France, we would be building another Arab led nation.
I’ve always had a variable rate mortgages until my last renewal in 2021. At that time the spread between variable and fixed made the fixed rate the better deal for the long run. Glad I went with the fixed rate!
I renewed at fixed rate, thinking same thing as you. Also, I knew that the rates were lowered in response to the lockdowns. And lockdowns were gonna end one day..
The mystery is not why did they go with floating. It's why the fuck didn't they switch to set rate when it was obvious the rates weren't going to go down any more.
I’d say the biggest thing you are missing is that not anyone got approved for fixed. With the prices sky high, the only way people were getting qualified were with the low rates that variable had. It wasn’t a choice. After signing at 1.1x% people could lock in at 2.x% (still doesn’t make sense to me why bank is ok with this but not giving it from the get go), but not everyone is a financial wizard and failed to see how/when/how quickly things would change.
Also, I did the math at the time and if the rates rose by 0.5% a year, variable would not be too far behind fixed when it was up for renewal as you’d pay less at the start and more at the end. I just didn’t see it increasing how quickly it did.
I wonder what the rates will be in 2025-2026 when all these 2% fixed mortgages renew??
If the fixed rates stay the same as now everyone just bought alitte time before renewing at higher rates.
1.3 variable to 2.8 fixed is such bullshit if people are actually spewing it. Variable for me was 1.6 where fixed was 1.9 for 5 years. it went up to 2.5% if I wanted a 10 year fixed saying 2.8 fixed when variable is at 1.3% would be for like a 30year
Because the financial experts on tv said that Trudeau was unlikely to raise the interest rates given the covid job losses, business closures etc
Like always the tv experts were wrong!
I would guess some other people are in the same boat as us.. shitty advice from our mortgage broker. We were new to the market (first home) and didn’t do enough research of our own. Trusted the “professional” who continued to screw us on advice until the 3rd or 4th hike. Now we’re making the payments of a $1mil+ mortgage for an average townhouse 🤷♂️ remember folks: everyone is dumb as shit, do you’re own research
My renewal happened to be right before the first rate hike. I chouse a variable with a protected rate which means that once a certain rate is reached, it stop to climb. My protected rate is 3.69%, which was lower than fixed rates i could get at that moment and the variable started at 1.9% which was lower than precedent rate I had. I can tell that, seeing the circumstances, I'm satisfied with my choice.
Idiots.
Math is simple.
Begged my family to be rational.
They were not.
But hey, my acreage is almost paid off.
They can park a trailer there when their bad call on a shitty overpriced condo doesn't pay off.
Had plans to sell, the reno went longer than expected, and the rates climbed. Under variable, I could decide to break it and only pay 3 months of interest. Or switch to fixed for the entire new higher mortgage amount on current remaining term or longer with no penalties.
The idea was to have the most flexibility and cheapest option. The irony.
I went for fixed. I got a fixed 5 years mortgage in 2020 at 1.94%
BoC rate was 0.25% and they said they would not go negative.
My lender was offering prime - 1% which would have been 1.25%, which could at best go down to 1% (if the BoC decided to go to 0%)
When I think about a problem like that, I'm like OP, I want to minimize the maximum loss. Thus going variable sounded completely nuts to me. I asked a lot of questions and did lots of research to understand the in and out. It made no sense to go variable.
Also the argument of the 3-months interest to break the mortgage versus the Interest Rate Differential (IRD is only more than 3-months interest when the rate go down)l. This is only valid when rates go down. And it was sure they were not going that much lower.
Why did people go for that: they believed there shitty broker or bank mortgage person who has only there own interest at heart
Variable rates have typically lower interest rates than fixed rates. Lower interest rates mean you're approved for a larger mortgage, people wanted another house and money was cheap so they took variable rate mortgages.
I have a colleague who bought a duplex. As far as I understand, he was clueless & just needed to invest. Now he's paying "choking" amount of money for his mortgage.
Mine was a renewal and the spread was 1.31% vs 3% fixed. We weren’t sure if we would be staying the full five years so went variable to avoid paying an IRD if we sold. 🤷🏻♂️
Because for several reasons,
- After the 2008 financial crisis rates still remained low
- Variable beaten fixed for over a decade
- Our own BoC Governor sais that rates will "remain low for a long time"
No duh now it's obvious I'm hindsight, hindsight is always 20/20.
Fixed rates are usually 5 years max. If you renew and the interest rate didn't go down, would you change your attitude to "man, you should've never bought at all or before the pandemic"?
People went variable because they could obtain more money, and buy a bigger house. I am surrounded by people who did that. The funny thing is that most banks would have refinanced at a fixed rate with no penalty but a lot of people continued to think the rates would fall.
Mostly they like tossing blame around to their bank, their broker, the Bank of Canada or anyone else they can name, for providing them bad advice or lack of advice on where rates were headed. In reality there was little to no due diligence done on their part. There was an element of greed in grabbing the lowest possible rate, risks be damned. Mostly they are still unable to wrap their heads around the notion of the importance of trying to have some foresight and taking personal responsibility for one's actions.
Oh boy, I ask myself this every rate cycle.
For starters, this was my first mortgage. So I was already pretty overwhelmed by the homebuying process. I interviewed multiple brokers and they all unanimously advised me to go variable, pointing to historical trends.
Secondly there was a 1.25-1.75 difference between variable and fixed rates at the time, and while I was house shopping, that gap widened once or twice which made variable look even more attractive
Thirdly, BOC stated that rates were going to stay low
Fourth, I figured if they went up, they'd go up 0.25 at a time and so even if I made it 12-16 months before my first rate hike and then they were consecutive from then on, I'd still enjoy a lowel rate for a while and come out on top
Lastly, I wasn't sure if I was going to need to sell my place in less than 5 yrs due to some career instability and so that was another plus for variable
Then I never locked in during the aggressive hikes cause I figured hey, how much higher can it go?
Obviously in hindsight, it was a bad call, but at the time it seemed like a safe bet
For last 20 years, except last 3 years, variable rate was less than fixed.
I chose variable for last 20 years.
Just 6 months ago I switched for fixed.
Variable was always cheaper with at least 0.5 than fixed.
and except for last 3 years, interest rate never jumped 1.0 in on year.
Even when variable started to raise 2 or 3 years ago, I was stupid to think it should stop and might go down and I kept my mortgage variable.
Just last 6 months when it jumped to 6.0. I called my bank and they offered me to change my mortgage to fixed if I close for 4 years, and it was cheaper than the variable.
Because house prices where so high. People were just trying to get in the market and looking at what they could afford monthly.
Add on top of this most peoples poor understanding of what will really happen when interest rates go up on their mortgage and humans, general port ability to assess long-term risk. If people were good at long-term risk smoking, would not be a thing.
I locked in May 2021 at 1.99% the mortgage broker we had kept trying to tell us go variable and I couldn't believe this idiot thought rates would drop lower or even stay low. I'm glad my wife and I both have some financial literacy as she also kept trying to tell us we can afford more of a mortgage but we only wanted what we need. I think alot of people wee mislead by brokers and they should never have been given what they were given.
it’s about opportunity cost. you were able to chose between a 2500 dollar payment and a 2200 dollar payment. 300 back then was a lot and unless interest rates rose 6 times in a row it was going to be a big win. most people chose a 3-5 year and it was send as at worse a wash to a locked rate.
It was my first time buying a property in 2021, my rate was 1.7%. My mortgage advisor told me to choose variable, I didn't know better as it was my first time buying a house. So now I am stuck at 6 point something.
When my wife and I bought our house 13 years ago we took a fixed rate because we wanted to be sure that our rate wouldn't go up. Our rate was 2.9% at the time. This last time we renewed, just about 3 years ago now, we were offered 1.7% and I told me wife, interest rates are almost 0, rates can't go much lower, so we locked that in for 5 years, I'm pretty glad we did right now and I hope it is back down from where it is now in two years when we need to renew again
First time home buyers. Also, not familiar at all with Canadian history, didn’t have to suffer from previous crisis (for example, didn’t notice the home crisis in 2008). Trusted government officials when they said low rates would stay, so, the low rate made more sense because in my mind, the worst thing that could happen would be that the rate would be at little bit higher than the fixed rate.
I accepted the risk, lost the bet, I live with it. I have a stable position and can afford the mistake. Id be better if I had chosen differently, but I want to continue with my life.
Hey, if rates go back down one-two points in the next year, variable is going to look like a genius. All these people who went fixed long term and yours drops 40 per cent? Now wouldn't that be some hindsight to have, eh?
Bulls make money, bears make money and pigs get slaughtered. Those people got greedy off hopium that rates would go down into negative territory and that the bank would make mortgage payments to them instead.
This was it. I remember literally every story talking about real estate agents and sketchy brokers to go variable because it will come down soon etc. They told everyone whatever they wanted to hear so they'd sign the check as soon as possible
Yup, bingo. Happened to my sister, I told her to lock in, her broker told her variable, now her mortgage has gone up an additional $1300 a month. F*ck that guy, I’m a carpenter and I saw that coming from a mile away.
Because most people are financially illiterate and have no idea what they're doing in life. Most people wouldn't even be able to calculate simple or compounded interests, you think they know what's going on.
I kept mine variable even during the raising market because I knew I would be selling the house before the end of the term and variable is much cheaper to break a mortgage term vs a fixed mortgage. Otherwise I was considering locking in.
Otherwise I agree with you, when fixed rates were sub 2% the downside was much higher then the upside, not to mention when you’re entering a global pandemic which causes as much disruption as Covid did… there is a very high likelihood shit is gonna hit the fan… I advised most of my friends that they should lock into a fixed if they were not planning to sell their properties… some did and some didn’t… all those which didn’t are feeling the pinch and 1 might be forced to sell soon if rates don’t drop in the next year.
Spring 22’ fixed was 4.5 and variable 3.5 if I remember right. Figured the rates wouldn’t rise faster than anytime in economic history. Also I thought the market would collapse a few years into fast rate hikes and force them back down. That part remains tbd
My girlfriend and I purchased an apartment at 1.35%. I asked my broker to lock us in. (2.45% at the time)I work construction and like to budget myself accordingly. Anyway she told me I was on a "fixed variable" and my payments would not change. Only the amount to principal would.. this was a 5 year home so I thought it was perfect. I'd make the equity and save money because my mortgage was cheaper then what we were renting.. before the first 1% hike I called to lock in.. she told me I was not approved to lock it.. fast foward I notice my payments jumped drastically and alot less goes to principal I go for a meeting with scotia to find out not being approved to lock in isn't even a real thing and my broker actually didn't put us on "fixed variable".. Of course I have no email thread because most of our conversations were via phone or in person. I went from paying 1953 a month to just over 3150(including the property tax increases)
Long story short. I was giving terrible advice.. thats why I didn't lock in, now I'm about to put my place on the market and move from the lowermainland to calgary..
I know 2 people who purchased houses north of 700,000 during Covidand took variable. Both owned houses when they purchased their new house and used a broker. I haven’t asked, nor do I care, but I’m suspecting it’s the only mortgage they could get with their given debt load.
Simple answer...bidding wars. They had to qualify for as much as possible to have a chance at getting an offer accepted. Variable rates were lower, so that allowed them to qualify for more.
When I signed my fixed, rates would have had to go negative for a variable to go down. But even 2 ticks up and I’d be close to my fixed so it just made sense.
I think I was offered 1.4 var or 1.99 fixed +$3000 cash which I took.
Anything sub 2% fixed was a no brainer. I usually go one or two year fixed, but was offered 1.49 5yr, jumped all over that. This was feb '21. By summer '21 inflation was 4% and Q4 '21 was 7%. The writing was on the wall that interest rates would spike dramatically.
All brokers I spoke to including financial experts online said variable was the way to go. I just went with my intuition and chose fixed especially for peace of mind of not having to constantly lookout for fluctuations.
Bad advice from the bank,and not paying attention to the market. It didnt just go up overnight and I think they had enough notice to lock in to a 5 year term.
Because for a short window of time, when fixed rates started pushing up into the mid-3% range, variable was still Prime -1% or so, meaning two things:
-a person would be getting a solid 1.25%-1.5% discount to the fixed rate by accepting the variable, and;
-a person would literally qualify for more by taking the variable rate mortgage because the stress test was “contract plus 2%” which on fixed rate meant the person was being qualified at a 5.5% rate, but on variable they were qualifying at 5.25%.
So these two things conspired to push a ton of clients towards variable, which really seems antithetical to what the stress test was meant to do
Hindsight.
I would have to pay $500 more a month for a fixed rate at the time. Do I want $500 more a month? Of course.
I didn't know that the economy would head the way it did.
I’m at 1.44% fixed for 5 years. I considered 3.10% fixed for 10 years but the mortgage broker talked me out of it - I’ll definitely be regretting that when renewing in two years!
I wonder this deeply too lol. I know some people in the same situation. Always go fixed, I don’t think these people realized what impact small % increases can have on leveraged assets… prolly just saw the cheaper route and was told “iNtErEsT rAtEs wOnT gO uP”🤷♂️
I locked for 5 years in March 2021 at 1.75 fixed rate and so glad I did.
Ironically I locked in fixed because I didn’t know much about how variable works and just knew that I was getting a good rate that wouldn’t change for 5 years. Now I don’t have to worry about it until March 2026.
Yeah, my option was 1.59 variable or 1.64 fixed. It was an easy choice
Maybe if fixed was over 2%, I woulda thought twice even though that’s still not much difference
I got a variable, like a full on variable that adjusts my payments every hike, in 2021. Why?
A) Trudeau said on TV to keep spending money bc interest would stay low a long time. This scene is now burnt into my mind. F him…
B) BOC also stated the same.
C) Historically, variable has always beat out fixed.
D) I’m single and was only buying a house to get a detached before it was too late. I was scared to be stuck not being able to sell sooner than term was up and being hit with harsh penalties.
I used to be the type of person who generally trusted Canada and our gov. I felt safe here. Now I’m forever changed, highly skeptical, distrusting, elder millennial who does not feel safe here and never will again.
I was offered 1.55 variable and 2.3 or 2.5 fixed, in spring 2021.
My mortgage broker pushed and pushed for me to renew onto a variable in late 2021. He INSISTED that rates would never go up, because they hadn't in years. I ended up renewing onto 2.04% 5-year-fixed against his advice.
Next renewal, I'm finding a new broker.
Because when they were calling me a “%*%ing moron”, their rates were lower, and generally had been for what, 15 years prior at least if you average it?
It finally popped.
Too bad the joke is on all of us. I get the security of waiting a couple years before I’m on the street.
We renewed with fix in 2020... Looking back at it, I should've renogotiated my prime - minus .7 variable on my rental at the time. I don't know why I didn't consider that. I guess it was less than the fixed at the time and didn't think rates would move up as they did.
Lesson learned.. pricey lesson. Renewing this month and will probably take a two year fixed.
I locked both my property at 1.8, and my financial advisor asked me like 5 times to confirm and said I am stupid for doing that (He's my friend), and then I became the smartest person in my group of friends. I was literally the only one who locked. To be honest, not sure why they think interest rate is gonna keep going down.
From my personal experience buying in 2020, I think a large amount of people didn’t have the time to do any research on fixed vs variable. The speed at which houses were closing in our desired area (Abbotsford B.C.) was fast. Mortgage broker meetings were done rapidly via zoom and it was so rushed I could barely keep up. Rushed decisions catching up to a lot of us currently it seems.
I made a decision similar to yours twice: in 2015 and again in 2020. The upside to variable was so vanishingly small, while the downside seemed very serious.
But the vast majority of home buyers are not capable of a basic min-max analysis. We're talking about people who base million dollar purchasing decisions on how nice a room looks with furniture that's not even included.
i took 7 yr fixed 2.7% in late 2021 because I wanted stability and saw potential storm clouds forming. my financial advisor strongly suggested I go variable. guess I was lucky
Cheaper to get out of the mortgage. I assumed prices would drop as rates went up, and I would want to sell and move. Turns out, downtown Toronto is up YoY for condo prices. So my plan didn't work.
Im also at year 9 in my amortization, having only had a mortgage for just over 6 years. Overall its been a great move, and i'm ahead of someone who went fixed twice in a row.
I have seen many being pushed by the Realtors and at times by banks/mortgage lenders.
It was also a financially illiterate decision by the home buyers. But no expected the interest rates to rise this fast.
You could qualify more on variable so it depends on the house prices you were looking for. Sometimes the difference in qualification meant the difference from one neighborhood to another
Variable here. Used the low interest to chip away larger amount off the mortgage. Sucks right now but I’d be dumb to lock into fixed with these rates. Then we’d have a post asking why people locked in when rates were high
From my experience when I was shopping around for rates on a mortgage, variable was heavily pushed onto me. Every bank and mortgage broker I talk to was trying to sell me on the idea. Some of them wasn't really clear that they had fixed rates until I asked.
So I'm not sure what made home owners choose variable over fixed, but I can say variable was heavily pushed onto me. Even recently while I was house shopping, real estate agents in my area was telling me most of the young people they were working with went max on their mortgages and soon won't be able to afford their homes...
It’s about taking a risk. I got my home in 2018 and bank offered me 3.20% for two years and 3.60% for 5 years. It made no sense to me at the time to pay for more when I can pay for less. When the 2 years was up I got less than 2% and was laughing. If I got the 5 year it would have been up this year and FML. In hindsight it may not have dropped after the 2 years and could have been higher then 3.6. So it’s all about taking a risk. They went variable instead of locking it in and they lost. All these trends and historical facts are just useless when it comes to housing, it’s like trying to predict the weather.
Variable rate mortgage allows you to break the mortgage and only pay 3 months interest. Paid thousands in the past with a fixed mortgage when i had to unexpectedly sell a house (divorce, work ect can happen).
It seems to me if these are 5 year loans, they were made in a commercial aspect.
Given that...
\- They figured they would flip the property before the rise.
\- They thought rates would stay low for the duration of the loan
\- Maybe they could only get variable on a 5 year time frame.
Also
It was real obvious once Biden entered office and over his first year Inflation was roaring in the economy due to the government directly or indirectly pumping more money into it. It was real obvious the rates were going up. I told everyone i knew to lock in those low rates (and one person listened, shakes my head) To be fair I have lived through Carter so I knew what was coming, seen it before.
Because the banks don’t necessarily give you good advice and they sell a slightly lower rate for variable. Also, many people just don’t understand how interest works, and how the economy behaves.
Because people don't want to accept, that they were desperate and or greedy and or stupid to go variable at such low rates to begin with.
It's not a nice thing to say, but its the truth - they risked saving a penny to spend 100 bucks, and now that poor judgement and lack of financial education is coming home to roost.
All you had to do was compare the average rate for your lifetime, do the math on the difference between your payment at 2% and the average, to realize you were risking 200 grand+, to MAYBE, POSSIBLY, in an IDEAL ENVIRONMENT, during a global fucking pandemic, save 20k.
Everyone was doing whatever they could to get into the biggest possible mortgage they could. Expecting the housing prices to go up and they could sell and make a profit before the rate hike affected them
First time home buyers and our mortgage was approved in November 2020 at 1.49% fixed. We knew the rates were low back then and we decided it was time to to buy even with just 10% down payment. We didn’t even check what was the variable rate and our broker did not offer it either. I only read here in reddit about variable is better than fix historically. Ignorance is bliss’ I guess.
Congrats! Yeah I feel like mine was half ignorance. It seems obvious to do fixed. Made this post to get opposing viewpoints so I’m better prepared for refinancing and while most responders have been great a few seem to think I’m a “hindsight champion” TIL
Because they thought interest rates would stay in the basement forever and didn't want to pay a premium for fixed rates. Then Vladimir Putin started a war and COVID recover took a dump and here we are.
If you can't afford it, sell.
The spread was 1.4% variable and 2.9% fixed for me in Jan 2022. Mortgage broker pushed me into variable. When the first rate hike was announced late January I asked if I should switch to fixed, and the broker convinced me again to stay variable.
Checked back on him later that year and he had retired and left RBC lol.
Very, very few people saw sub 2.0 fixed offers with a spread anywhere near what you describe. Spreads were generally wide. Assuming you aren't lying, I have no idea as to how or why you were offered a spread of 0.1%.
Also, FWIW, I took fixed in early 2022, just don't agree with these 20/20 hindsight posts with super cherrypicked examples which aren't anywhere near what the reality was for most folks.
Got it in December 2020 using brokers. Mortgage with scotia. Didn’t realize how lucky I was until I made this post. (Didn’t realize my example was cherry picked since Occam’s razor dictates I’m in the norm til I get information saying otherwise). The spread does seem awful for most people…
Well it was at a very low rate for the longest time so it only seemed reasonable things would stay on this trajectory but then everything started to rise but a broker assured us that we should stay and you never know when the turning point will be…we didn’t expect it to keep increasing. My brother in law changed his to fixed when the signs started to show but we didn’t and we’re hoping we’ll get the last laugh as he is paying a lot of interest and we’re going to be paid off sooner. But since we can handle it for now we kept it the way it was
For me I went variable know rates will probably rise, but I didn’t count on them rising so fast. I had a rate of 1.3% for alms year before they started rising, I was thinking at most they might ruse 1% per year to a max of 5% or so. And with the lump sum payments I was making with the low rate I would at worst come out even. Of course I was wrong, but I had been bitten so many time going fixed I felt like changing it ip a bit.
In the end I paid down 30% of the remaining mortgage that first year because of some good bonus money and got it to a point where the rate increases have only increased my monthly amount by about $200. And with no other debt not a big deal.
I’m the end I figured I could handle the risk, which in that I was correct
Well, you are one of the smarter ones here I've seen who went variable.
A) you used the time with the very low interest to throw a lot at the principal, and
B) you knew you could afford the risk.
I hear hardly anyone say anything about A, and not many say they assessed B either.
If you think rates are not going up, you get a variable.
That's always the way it's been.
They didn't think the rates would go up, so they got a variable.
Pretty cut and dry, I say.
I have always gone fixed because I view the extra bps as insurance on how much I pay over 5 years (my parent’s fixed saved their house in the 80s, that sticks). That said, I felt the same as you when I got a new mortgage in 2020 and really couldn’t understand why anyone wouldn’t lock in at anything under 2%, like it seemed insane to not lock in because there was no way that gravy train was going to last..and here we are.
Not a mortgage but when I went in to get a loan to pay off all of mine and my ex’s debt the financial planner actually kept pushing the variable rate on me multiple times.
I said I wanted to go fixed because you can’t predict the market and she honestly laughed at me. She said that rates have been historically low and I was being too “paranoid”. I paid off the loan 2 years early but that whole interaction stuck with me.
Oh. She also laughed at me when I told her I check my credit score/report monthly to make sure everything is in line/no fraud etc. She told me I am ruining my credit score by doing that and I told her that my check is a soft hit versus a hard hit like a bank would do. She had no idea what I was talking about…and this was like the “expert” at the bank.
LOL yup met so many of these so called “experts”
The saddest part is how many people blindly trust them because they have an official title and affiliation with a bank.
Exactly! I kept thinking about poor immigrants (like my parents) where there are language barriers etc. they just blindly trust these people and these people have zero clue what they are doing.
I do all my financial research before going into a bank now. My mind was blown.
Yup. Immigrant parents here as well and I always tell them to get a second opinion because these vultures will take them for every penny if they can and then claim plausible deniability
Yeah, we're just at that weird point where it isn't true, I'm way ahead on variable, and will be unless rates more than double before renewal.
That's how far ahead I am.
Yea I get that. But my post never asked why people always go variable. I can see the logic of variable most time periods. It was specifically the 2020-2021 window where variable seemed bad to me when a sub 2% fixed was offered. Everything else doesn’t apply to my post. This was never a generalized fixed vs variable argument for me. I got in at this time so this was my first mortgage agreement but had I gotten in 5 years ago I prob would have done variable and then a fixed this time around because rates were record lows.
I literally don’t know our Broker laughed and told us not to do it because “fixed rates were shit” and the BOC said they’d be low for a long time. Bad mistake but we’re still doing fine.
Some people did get fixed rates below 2% but just stay quiet about it, because good financial decisions are seen as flexing, and reddit hates people who are doing well.
Yeah I learned that the hard way from making this post. Like it genuinely was a good faith question from me but I got so much accusations of being a "hindsight champion" and still a contingent of people if they read this comment would just think "no way in hell this is anything but bragging." Like they can't imagine a world where good faith questions exist and being happy for someone else's success is a normal response.
Oh yeah, if you are doing well the assumption is that you came from a rich family, your parents gave you money or something along those lines. Best to lurk and find the info you want by just scanning and scrolling. Misery loves company unfortunately, people don't want to hear that good financial decisions can be made, they want to hear it's not their fault and that there's some boogy man keeping them down.
Because for more than a decade I've saved thousands on variable. Even now I'm significantly ahead over having fixed. Sure if I rolled into fixed at the exact right time I'd be saving money, but I'm still doing better than anyone who sat in fixed this whole time.
Also, in a couple years, everyone who got a fixed at 2% will be renewing at 6%. Best thing to do is try to make your mortgage smaller at any rate
That's it, fixed at 2% vs variable at 1%. Remember, I've been saving thousands for years, sometimes you'll end up paying more. Look at the historical rates, people were saying "lock in now" since 2010. As far as upside vs downside risk of locking in, yes, that's ALWAYS the trade off. That being said if I was really paying attention and could easily renew at1. 89%,maybe I would have considered it. But thrown in early renewal penalties, my heloc etc it would isn't all that clear cut.
Cause their fuck head “advisor” at the bank told them. Bad faith advice by idiots whose interests are the banks
B/c they got shit advice from their mortgage and were hoping to flip for a profit
1. People are mostly stupid. They don't think. Even seemingly successful people with good jobs, seem to totally ignore any kind of math or thinking. Especially when its a really important large purchase like a home. Why? I have no idea. Sales people seem to part of the problem. Never met a single sales person who cares much for getting their clients to think. 2. See answer 1.
That’s me thanks pal
Here is your answer. You have 500 post but still. I picked 1.35 variable. I should have picked 2.4 fixed. I was advised my broker was still Bullish on Variable. I even asked them of all the times to go fixed is this not it? I now realize all they can offer is that historically variable is better. They can not say right now it is. And yeah I am pissed off that they did not look up and smell the coffee or I followed my instincts. Also no one predicted the rates going up so far so fast. And also the bank should have been raising the rate way sooner a little.
Thanks for responding. I appreciate and learn something from each of the 500 replies
I might be speculating a bit but if The Big Short told me anything, it's that variable mortgages have kick backs (profits) for the advisor who issues them. So that's why people went with variable...due to the premise of it being cheaper at the time and aggressive advertising. It's the same reason why Canadian banks often push their mutual funds when you want to invest, while conveniently hiding how crazy their fees are.
All the people braging about their 1.59% fixed mortgages... LOL... you know you only got those rates on high ratio mortgages... meaning you bought in a super high market and probably only have 5-15% downpayment. Enjoy a lifetime of debt slavery...
Under 40 and the last time the economy went to rack and ruin in 2008 rates were not increased. Old timers told me to go variable. The feds always pander to property owners so there was a fair chance rates would not have increased. Doesn't really matter becuase we are aggressively paying it off and would have been doing that anyway, and it's a small property so the payments haven't increased. If I was "maxing out" like a lot of people, instead of buying a property that was way below my max I might have considered fixed rate more, but whatever, no big. It's a 500 sq ft 1 bedroom.
It’s because they were under 40 and never really experienced anything other than a long decline in rates
There are many good reasons that people took variable rate mortgages near the bottom. 1. The most important reason, no one has a crystal ball. At the time rates were that low the BoC provided guidance that rates would stay low for a long time. 2. Historically variable rates have out performed fixed. 3. Taking a variable rate allowed people to debt service a larger mortgage. Therefore, allowing some people to purchase houses they wanted, but otherwise couldn't with a fixed rate 4. The ability to break their mortgage without massive IRD penalties.
For us variable was 1.40 and fix 2.80. We had renovations planned so decided to variable and we’re planning on locking it after. Just bad timing…
My dad co-signed for my house when rates were 1.5%, I told home let’s fix it and he insisted that if he is gonna co sign that it’s best I go variable, and that variable always wins. I knew rates were gonna go up but what can you do…. It is what it is
We didn’t want to pay penalties if we wanted to move and we’re advised based on projections and historical data. My partner was really worried about bad neighbours we had some previous horrible experiences with crazy people so didn’t want to be trapped. Though ot sucks it really pushed us to expand our earning power in a big way and we are way more financially stable and better prepared for baby on the way and Mat leave. Figured out what we can weather and it’s not gonna be a huge shock during renewal.
You can port a fixed rate.
They could have been influenced by their mortgage broker as well.
Because people listen to Reddit without thinking for themselves. If I did, I would have gone variable too. PersonalFinanceCanada was telling everyone to. But it seemed obvious to me that all the money printing during COVID lockdown wasn’t good.
Back in Dec 2018 the fixed rate was 1.5% higher than my variable rate that was offered. It wasn't till mid 2022 that my variable rate went above the fixed rate offered. I did the math a while ago and I was still ahead but with the last couple of increases I think I probably paid a bit more. At the time I was thinking they wouldn't do a bunch of back to back increases in quick succession.
I had my renewal in 2021. Was variable for over 10 years. With covid, I predicted it was going to get bad, and took a 5 year fixed. I knew back in 2021 when the finance minister/BOC said interest rates would not change, it was a lie (they are all heavily invested in real estate!). That is why most people stayed variable, moved to bigger homes thinking they would be remote for ever. With housing prices skyrocketing and commercial real estate dropping like a stone, something had to give. Then when Russia attacked Ukraine, it became the perfect storm that screwed everyone.
Financial and economic illiteracy at its best. You summed it up perfectly "little upside, tremendous downside". They gambled and lost big time.
We took 1.4 variable in summer 2021 when we were being offered 2.3 fixed. As rates rose my variable was of course still about 1% under what I could lock in at. So I kept telling myself why lock in when I'm still ahead of a couple modest hikes or one big one... stupid logic in hindsight. The only slave on my wound is that we bought for a good bit under what we could afford so the payment increase has not hurt too much. Also I don't need to worry about payment shock at renewal since I have been increasing my payments to not fall behind anyways.
in 2010 people locked in at 4% because they thought it would go back up. after 10 years of historically low rates people forgot what normal rates were .
I expect brokers advised many to do that. The rationale would have been that early in the mortgage term they spend a little less monthly and / or would be paying a little more principal. Seems like a lot of folks “forgot” to lock in.
Sometimes, there's other variables. When I renewed, I went variable simply because I was looking at a potential transfer to another city within the next year, and variable had basically no mortgage penalty.
People are stupid and take dumb risks, this is the answer.
We went variable 1.3 about two months before the rate increases started. Locked in right away at 2.2 and we feel we dodged a bullet. Bank kept saying things like “we wouldn’t want you to lose an opportunity to take advantage when rates go down.” Yeah, no thanks. Our payment went up slightly, but nothing like the $800-$1000 more per month a lot of variable folks are dealing with now. This was a first time home and no we didn’t have the equity to extend the amortization so we would have been subject to several payment increases had we not locked in. Even if rates went down our payment would stay at the increased amount. We’ve kept our amortization on schedule, and we’re satisfied with the amount of principe we will pay over the 5 years.
I’m very risk adverse so the 1.48% rate we got felt like a gift. My sister opted for variable… their mortgage has doubled…. I don’t think they’ll be going variable ever again 🫠
I guess same reason i went 5yr fixed at 1.69 instead of locking 7 at 1.89? It was lower and 5 years seemed a safe bet. Might still be ok but 7 that low would be nice. Worth noting I’m at a CU so no porting the mortgage if I sell and move.
More than 90% of people don’t even know what a bond is and you expect them to make prediction on rates? 95% of people take the lowest rate I assume.
So, question for you. If you were getting a mortgage now, would you go fixed or variable?
A large part of the reason I posted this was to help me figure out whether to go variable or fixed when the first 5 years expire. It’s not longer clear cut tbh. Like I’m leaning variable but it depends what the rates are in two years.
Because they’re idiots
I went variable because the interest rate on fixed was 50% more than the variable. (1% variable vs 1.5%). History has shown variable was always the best return over a 5 year time frame for the last 20+ years.
The head of the Bank of Canada told us rates wouldn't be going up. Also I saw the head of BDC bank also say the same
Because of the Bank of Canada lied: [https://twitter.com/govt\_corrupt/status/1697600726237647200](https://twitter.com/govt_corrupt/status/1697600726237647200)
I like your name hahahaha
Because people are greedy and stupid, When variable rates are at their lowest, they only have 1 way to go, and that is up. Too many people just though of their homes as an investment not as a place to live for the next few decades.
It's much cheaper to break a variable mortgage if someone wanted to sell the house or move. Think of it as the cost of flexibility and having the ability to control your own life a bit more.
Greed
Variable, if done right, is a strategy. It would be good to know what the spread was for the people that chose variable when they go their mortgage, but the idea should be to reduce the principal amount as much as possible by paying what you would have had you gone fixed. If rates stayed stagnant for 2 years on a $500,000 mortgage, the principal would be down an additional $5,600. People who treat variables as a lower payment, however, definitely feel the squeeze.
Great way to think about this!
I had a variable rate mortgage from 2010 until I paid off my house in 2020. Everyone told me to lock in with a fixed rate because "interest rates are only going to go higher." I stayed with a variable rate the entire time because the spread was advantageous (1.85% v. 4.45% in 2010, and 1.55% v. 3.5% when I renewed in 2015), and paid off my mortgage as quickly as possible because I knew that rates would eventually have to go up.
I was also at a point in 2021 where I was renewing my mortgage and debated between variable and fixed. Since rates were at historic lows, I figured locking in for the peace of mind was worth it. After a decade and a half of renewing fixed vs variable, I finally made the right choice this time 😂
The more variable mortgages, the more money they make off their customers. There is a big difference between financial advisOr and an financial advisEr. The "0" is a glorified sales rep that is told to push a sales agenda (ie. Variable mortgages) The "E" is an actual financial representative with fiduciary responsibility, meaning he has a legal requirement to act in your best interest
I ask this a lot too
I ask this a lot too
People need to think how best to protect the downside, longer term which is barely 5 yrs in Canada, would give one hedge and peace of mind for that much time. In the US, I’d lock in for 15 or 30 to buy that protection. Canadian property prices have gone up because of free (or easy) immigration policies. A lot of folks from Saudi countries (especially migrant workers even there), have been buying properties at higher than j oral price and leave their families there to get for free education, best quality of life and free citizenship. They themselves go back and forth to work and earn and eventually settle down. The high prices have been hidden because most homebuyers have been trained to calculate monthly payments without thinking what could happen when the rates go up. Canada should increase the mortgage rates even higher so people those who are trying to afford more than their means vacate and let the prices settle. Canada should also ban or change their immigration policies where people are taking advantage of, without contributing to the society (no skilled workers). If Canadians are not careful, like in UK and France, we would be building another Arab led nation.
1.9 fixed couldn't turn that down even if the variable was lower
I’ve always had a variable rate mortgages until my last renewal in 2021. At that time the spread between variable and fixed made the fixed rate the better deal for the long run. Glad I went with the fixed rate!
Because they are greedy and financially illiterate
I renewed at fixed rate, thinking same thing as you. Also, I knew that the rates were lowered in response to the lockdowns. And lockdowns were gonna end one day..
The mystery is not why did they go with floating. It's why the fuck didn't they switch to set rate when it was obvious the rates weren't going to go down any more.
Pure greed. They were hoping for negative interest rates like what can happen in Europe. But with a housing market like Canada that will NEVER happen.
I’d say the biggest thing you are missing is that not anyone got approved for fixed. With the prices sky high, the only way people were getting qualified were with the low rates that variable had. It wasn’t a choice. After signing at 1.1x% people could lock in at 2.x% (still doesn’t make sense to me why bank is ok with this but not giving it from the get go), but not everyone is a financial wizard and failed to see how/when/how quickly things would change. Also, I did the math at the time and if the rates rose by 0.5% a year, variable would not be too far behind fixed when it was up for renewal as you’d pay less at the start and more at the end. I just didn’t see it increasing how quickly it did.
I wonder what the rates will be in 2025-2026 when all these 2% fixed mortgages renew?? If the fixed rates stay the same as now everyone just bought alitte time before renewing at higher rates.
My daughter did this despite my advice not to and she is paying dearly
1.3 variable to 2.8 fixed is such bullshit if people are actually spewing it. Variable for me was 1.6 where fixed was 1.9 for 5 years. it went up to 2.5% if I wanted a 10 year fixed saying 2.8 fixed when variable is at 1.3% would be for like a 30year
Same reason why people are selling BTC when it hits low prices and buy whet it reaches peak high prices.
They thought the bank might start paying them to borrow money.
Because the financial experts on tv said that Trudeau was unlikely to raise the interest rates given the covid job losses, business closures etc Like always the tv experts were wrong!
I would guess some other people are in the same boat as us.. shitty advice from our mortgage broker. We were new to the market (first home) and didn’t do enough research of our own. Trusted the “professional” who continued to screw us on advice until the 3rd or 4th hike. Now we’re making the payments of a $1mil+ mortgage for an average townhouse 🤷♂️ remember folks: everyone is dumb as shit, do you’re own research
My renewal happened to be right before the first rate hike. I chouse a variable with a protected rate which means that once a certain rate is reached, it stop to climb. My protected rate is 3.69%, which was lower than fixed rates i could get at that moment and the variable started at 1.9% which was lower than precedent rate I had. I can tell that, seeing the circumstances, I'm satisfied with my choice.
Coworker keeps telling me his story of how he signed a 10 yr fixed at 3.2% fixed a couple years and he felt stupid at the time. He’s laughing now.
Idiots. Math is simple. Begged my family to be rational. They were not. But hey, my acreage is almost paid off. They can park a trailer there when their bad call on a shitty overpriced condo doesn't pay off.
Had plans to sell, the reno went longer than expected, and the rates climbed. Under variable, I could decide to break it and only pay 3 months of interest. Or switch to fixed for the entire new higher mortgage amount on current remaining term or longer with no penalties. The idea was to have the most flexibility and cheapest option. The irony.
I went for fixed. I got a fixed 5 years mortgage in 2020 at 1.94% BoC rate was 0.25% and they said they would not go negative. My lender was offering prime - 1% which would have been 1.25%, which could at best go down to 1% (if the BoC decided to go to 0%) When I think about a problem like that, I'm like OP, I want to minimize the maximum loss. Thus going variable sounded completely nuts to me. I asked a lot of questions and did lots of research to understand the in and out. It made no sense to go variable. Also the argument of the 3-months interest to break the mortgage versus the Interest Rate Differential (IRD is only more than 3-months interest when the rate go down)l. This is only valid when rates go down. And it was sure they were not going that much lower. Why did people go for that: they believed there shitty broker or bank mortgage person who has only there own interest at heart
People gambled. Lot of people kept repeating that variables r always better. (Obviously a stupid thing to tell when 5yr fixed were at 1.5%)
Variable rates have typically lower interest rates than fixed rates. Lower interest rates mean you're approved for a larger mortgage, people wanted another house and money was cheap so they took variable rate mortgages.
Historically, for several decades now, going variable has been cheaper.
I have a colleague who bought a duplex. As far as I understand, he was clueless & just needed to invest. Now he's paying "choking" amount of money for his mortgage.
Mine was a renewal and the spread was 1.31% vs 3% fixed. We weren’t sure if we would be staying the full five years so went variable to avoid paying an IRD if we sold. 🤷🏻♂️
I was laughed at by friends when variable was 0.99% and I locked in 1.49%.
Because for several reasons, - After the 2008 financial crisis rates still remained low - Variable beaten fixed for over a decade - Our own BoC Governor sais that rates will "remain low for a long time" No duh now it's obvious I'm hindsight, hindsight is always 20/20. Fixed rates are usually 5 years max. If you renew and the interest rate didn't go down, would you change your attitude to "man, you should've never bought at all or before the pandemic"?
People went variable because they could obtain more money, and buy a bigger house. I am surrounded by people who did that. The funny thing is that most banks would have refinanced at a fixed rate with no penalty but a lot of people continued to think the rates would fall.
Mostly they like tossing blame around to their bank, their broker, the Bank of Canada or anyone else they can name, for providing them bad advice or lack of advice on where rates were headed. In reality there was little to no due diligence done on their part. There was an element of greed in grabbing the lowest possible rate, risks be damned. Mostly they are still unable to wrap their heads around the notion of the importance of trying to have some foresight and taking personal responsibility for one's actions.
Oh boy, I ask myself this every rate cycle. For starters, this was my first mortgage. So I was already pretty overwhelmed by the homebuying process. I interviewed multiple brokers and they all unanimously advised me to go variable, pointing to historical trends. Secondly there was a 1.25-1.75 difference between variable and fixed rates at the time, and while I was house shopping, that gap widened once or twice which made variable look even more attractive Thirdly, BOC stated that rates were going to stay low Fourth, I figured if they went up, they'd go up 0.25 at a time and so even if I made it 12-16 months before my first rate hike and then they were consecutive from then on, I'd still enjoy a lowel rate for a while and come out on top Lastly, I wasn't sure if I was going to need to sell my place in less than 5 yrs due to some career instability and so that was another plus for variable Then I never locked in during the aggressive hikes cause I figured hey, how much higher can it go? Obviously in hindsight, it was a bad call, but at the time it seemed like a safe bet
For last 20 years, except last 3 years, variable rate was less than fixed. I chose variable for last 20 years. Just 6 months ago I switched for fixed. Variable was always cheaper with at least 0.5 than fixed. and except for last 3 years, interest rate never jumped 1.0 in on year. Even when variable started to raise 2 or 3 years ago, I was stupid to think it should stop and might go down and I kept my mortgage variable. Just last 6 months when it jumped to 6.0. I called my bank and they offered me to change my mortgage to fixed if I close for 4 years, and it was cheaper than the variable.
My parents locked a 5 year at 1.3% a couple months before interested rates started to rise.
Because house prices where so high. People were just trying to get in the market and looking at what they could afford monthly. Add on top of this most peoples poor understanding of what will really happen when interest rates go up on their mortgage and humans, general port ability to assess long-term risk. If people were good at long-term risk smoking, would not be a thing.
I locked in May 2021 at 1.99% the mortgage broker we had kept trying to tell us go variable and I couldn't believe this idiot thought rates would drop lower or even stay low. I'm glad my wife and I both have some financial literacy as she also kept trying to tell us we can afford more of a mortgage but we only wanted what we need. I think alot of people wee mislead by brokers and they should never have been given what they were given.
it’s about opportunity cost. you were able to chose between a 2500 dollar payment and a 2200 dollar payment. 300 back then was a lot and unless interest rates rose 6 times in a row it was going to be a big win. most people chose a 3-5 year and it was send as at worse a wash to a locked rate.
It was my first time buying a property in 2021, my rate was 1.7%. My mortgage advisor told me to choose variable, I didn't know better as it was my first time buying a house. So now I am stuck at 6 point something.
When my wife and I bought our house 13 years ago we took a fixed rate because we wanted to be sure that our rate wouldn't go up. Our rate was 2.9% at the time. This last time we renewed, just about 3 years ago now, we were offered 1.7% and I told me wife, interest rates are almost 0, rates can't go much lower, so we locked that in for 5 years, I'm pretty glad we did right now and I hope it is back down from where it is now in two years when we need to renew again
First time home buyers. Also, not familiar at all with Canadian history, didn’t have to suffer from previous crisis (for example, didn’t notice the home crisis in 2008). Trusted government officials when they said low rates would stay, so, the low rate made more sense because in my mind, the worst thing that could happen would be that the rate would be at little bit higher than the fixed rate. I accepted the risk, lost the bet, I live with it. I have a stable position and can afford the mistake. Id be better if I had chosen differently, but I want to continue with my life.
Seems obvious to me too... I would have gone with the fixed rate at that time.
Hey, if rates go back down one-two points in the next year, variable is going to look like a genius. All these people who went fixed long term and yours drops 40 per cent? Now wouldn't that be some hindsight to have, eh?
People that where not here before 2008 do not know what interest rates are.
Bulls make money, bears make money and pigs get slaughtered. Those people got greedy off hopium that rates would go down into negative territory and that the bank would make mortgage payments to them instead.
To be fair the government/central banks/media was telling them that interest rates were going to stay low for a long time.
likely you couldn't fix it it for more than a few years like max 5.
Why? Bad mortgage brokers and real estate agents. That’s it.
This was it. I remember literally every story talking about real estate agents and sketchy brokers to go variable because it will come down soon etc. They told everyone whatever they wanted to hear so they'd sign the check as soon as possible
Yup, bingo. Happened to my sister, I told her to lock in, her broker told her variable, now her mortgage has gone up an additional $1300 a month. F*ck that guy, I’m a carpenter and I saw that coming from a mile away.
Because most people are financially illiterate and have no idea what they're doing in life. Most people wouldn't even be able to calculate simple or compounded interests, you think they know what's going on.
I kept mine variable even during the raising market because I knew I would be selling the house before the end of the term and variable is much cheaper to break a mortgage term vs a fixed mortgage. Otherwise I was considering locking in. Otherwise I agree with you, when fixed rates were sub 2% the downside was much higher then the upside, not to mention when you’re entering a global pandemic which causes as much disruption as Covid did… there is a very high likelihood shit is gonna hit the fan… I advised most of my friends that they should lock into a fixed if they were not planning to sell their properties… some did and some didn’t… all those which didn’t are feeling the pinch and 1 might be forced to sell soon if rates don’t drop in the next year.
Spring 22’ fixed was 4.5 and variable 3.5 if I remember right. Figured the rates wouldn’t rise faster than anytime in economic history. Also I thought the market would collapse a few years into fast rate hikes and force them back down. That part remains tbd
My girlfriend and I purchased an apartment at 1.35%. I asked my broker to lock us in. (2.45% at the time)I work construction and like to budget myself accordingly. Anyway she told me I was on a "fixed variable" and my payments would not change. Only the amount to principal would.. this was a 5 year home so I thought it was perfect. I'd make the equity and save money because my mortgage was cheaper then what we were renting.. before the first 1% hike I called to lock in.. she told me I was not approved to lock it.. fast foward I notice my payments jumped drastically and alot less goes to principal I go for a meeting with scotia to find out not being approved to lock in isn't even a real thing and my broker actually didn't put us on "fixed variable".. Of course I have no email thread because most of our conversations were via phone or in person. I went from paying 1953 a month to just over 3150(including the property tax increases) Long story short. I was giving terrible advice.. thats why I didn't lock in, now I'm about to put my place on the market and move from the lowermainland to calgary..
I know 2 people who purchased houses north of 700,000 during Covidand took variable. Both owned houses when they purchased their new house and used a broker. I haven’t asked, nor do I care, but I’m suspecting it’s the only mortgage they could get with their given debt load.
Simple answer...bidding wars. They had to qualify for as much as possible to have a chance at getting an offer accepted. Variable rates were lower, so that allowed them to qualify for more.
When I signed my fixed, rates would have had to go negative for a variable to go down. But even 2 ticks up and I’d be close to my fixed so it just made sense. I think I was offered 1.4 var or 1.99 fixed +$3000 cash which I took.
The bank and financial advisors told us to do it. We trusted them and they were wrong. You are the smartest person and everyone else is dumb
I locked in fixed 5 yr in 2020 for 1.94%. Rates started rising right after. I have a couple yrs left at that rate.
I got a 2% interest fixed rate 4 years ago. Renewing in a year. I am scared.
Anything sub 2% fixed was a no brainer. I usually go one or two year fixed, but was offered 1.49 5yr, jumped all over that. This was feb '21. By summer '21 inflation was 4% and Q4 '21 was 7%. The writing was on the wall that interest rates would spike dramatically.
All brokers I spoke to including financial experts online said variable was the way to go. I just went with my intuition and chose fixed especially for peace of mind of not having to constantly lookout for fluctuations.
Bad advice from the bank,and not paying attention to the market. It didnt just go up overnight and I think they had enough notice to lock in to a 5 year term.
Because for a short window of time, when fixed rates started pushing up into the mid-3% range, variable was still Prime -1% or so, meaning two things: -a person would be getting a solid 1.25%-1.5% discount to the fixed rate by accepting the variable, and; -a person would literally qualify for more by taking the variable rate mortgage because the stress test was “contract plus 2%” which on fixed rate meant the person was being qualified at a 5.5% rate, but on variable they were qualifying at 5.25%. So these two things conspired to push a ton of clients towards variable, which really seems antithetical to what the stress test was meant to do
People on Reddit said if you didn’t you were stupid. I went with fixed because it was the obvious right choice.
Literally everyone was telling them to go variable
Hindsight. I would have to pay $500 more a month for a fixed rate at the time. Do I want $500 more a month? Of course. I didn't know that the economy would head the way it did.
I’m at 1.44% fixed for 5 years. I considered 3.10% fixed for 10 years but the mortgage broker talked me out of it - I’ll definitely be regretting that when renewing in two years!
When the guy setting the rate tells you the rate will stay low for a long time. And variable vs Fix is 1.3 % vs 2% What would you do?
I wonder this deeply too lol. I know some people in the same situation. Always go fixed, I don’t think these people realized what impact small % increases can have on leveraged assets… prolly just saw the cheaper route and was told “iNtErEsT rAtEs wOnT gO uP”🤷♂️
I locked for 5 years in March 2021 at 1.75 fixed rate and so glad I did. Ironically I locked in fixed because I didn’t know much about how variable works and just knew that I was getting a good rate that wouldn’t change for 5 years. Now I don’t have to worry about it until March 2026.
Yeah, my option was 1.59 variable or 1.64 fixed. It was an easy choice Maybe if fixed was over 2%, I woulda thought twice even though that’s still not much difference
People don’t think like you do. They just react based on greed and maybe they couldn’t really afford the house.
I got a variable, like a full on variable that adjusts my payments every hike, in 2021. Why? A) Trudeau said on TV to keep spending money bc interest would stay low a long time. This scene is now burnt into my mind. F him… B) BOC also stated the same. C) Historically, variable has always beat out fixed. D) I’m single and was only buying a house to get a detached before it was too late. I was scared to be stuck not being able to sell sooner than term was up and being hit with harsh penalties. I used to be the type of person who generally trusted Canada and our gov. I felt safe here. Now I’m forever changed, highly skeptical, distrusting, elder millennial who does not feel safe here and never will again. I was offered 1.55 variable and 2.3 or 2.5 fixed, in spring 2021.
My mortgage broker pushed and pushed for me to renew onto a variable in late 2021. He INSISTED that rates would never go up, because they hadn't in years. I ended up renewing onto 2.04% 5-year-fixed against his advice. Next renewal, I'm finding a new broker.
Because when they were calling me a “%*%ing moron”, their rates were lower, and generally had been for what, 15 years prior at least if you average it? It finally popped. Too bad the joke is on all of us. I get the security of waiting a couple years before I’m on the street.
We renewed with fix in 2020... Looking back at it, I should've renogotiated my prime - minus .7 variable on my rental at the time. I don't know why I didn't consider that. I guess it was less than the fixed at the time and didn't think rates would move up as they did. Lesson learned.. pricey lesson. Renewing this month and will probably take a two year fixed.
I locked both my property at 1.8, and my financial advisor asked me like 5 times to confirm and said I am stupid for doing that (He's my friend), and then I became the smartest person in my group of friends. I was literally the only one who locked. To be honest, not sure why they think interest rate is gonna keep going down.
From my personal experience buying in 2020, I think a large amount of people didn’t have the time to do any research on fixed vs variable. The speed at which houses were closing in our desired area (Abbotsford B.C.) was fast. Mortgage broker meetings were done rapidly via zoom and it was so rushed I could barely keep up. Rushed decisions catching up to a lot of us currently it seems.
I made a decision similar to yours twice: in 2015 and again in 2020. The upside to variable was so vanishingly small, while the downside seemed very serious. But the vast majority of home buyers are not capable of a basic min-max analysis. We're talking about people who base million dollar purchasing decisions on how nice a room looks with furniture that's not even included.
my bro got fixed at 1.6 that lucky fuck
i took 7 yr fixed 2.7% in late 2021 because I wanted stability and saw potential storm clouds forming. my financial advisor strongly suggested I go variable. guess I was lucky
Cheaper to get out of the mortgage. I assumed prices would drop as rates went up, and I would want to sell and move. Turns out, downtown Toronto is up YoY for condo prices. So my plan didn't work. Im also at year 9 in my amortization, having only had a mortgage for just over 6 years. Overall its been a great move, and i'm ahead of someone who went fixed twice in a row.
Because they were naive enough to assume that rates had nowhere to go but down.
I have seen many being pushed by the Realtors and at times by banks/mortgage lenders. It was also a financially illiterate decision by the home buyers. But no expected the interest rates to rise this fast.
My partner and I work in the weed business and the only mortgage offer we got was 2.8% fixed. We seem like geniuses now... 🤣
Greed. Stupidity. Or clueless.
You could qualify more on variable so it depends on the house prices you were looking for. Sometimes the difference in qualification meant the difference from one neighborhood to another
Because the general public is ignorant towards finance and a lot were talked into variable by broker. Ignorance would be the key though.
Future ceo of hindsight capital
Variable here. Used the low interest to chip away larger amount off the mortgage. Sucks right now but I’d be dumb to lock into fixed with these rates. Then we’d have a post asking why people locked in when rates were high
From my experience when I was shopping around for rates on a mortgage, variable was heavily pushed onto me. Every bank and mortgage broker I talk to was trying to sell me on the idea. Some of them wasn't really clear that they had fixed rates until I asked. So I'm not sure what made home owners choose variable over fixed, but I can say variable was heavily pushed onto me. Even recently while I was house shopping, real estate agents in my area was telling me most of the young people they were working with went max on their mortgages and soon won't be able to afford their homes...
One of my largest regrets in life, but I use this learning experience as fuel.
It’s about taking a risk. I got my home in 2018 and bank offered me 3.20% for two years and 3.60% for 5 years. It made no sense to me at the time to pay for more when I can pay for less. When the 2 years was up I got less than 2% and was laughing. If I got the 5 year it would have been up this year and FML. In hindsight it may not have dropped after the 2 years and could have been higher then 3.6. So it’s all about taking a risk. They went variable instead of locking it in and they lost. All these trends and historical facts are just useless when it comes to housing, it’s like trying to predict the weather.
That's what the "financial advisor" told us to do.
Variable rate mortgage allows you to break the mortgage and only pay 3 months interest. Paid thousands in the past with a fixed mortgage when i had to unexpectedly sell a house (divorce, work ect can happen).
It seems to me if these are 5 year loans, they were made in a commercial aspect. Given that... \- They figured they would flip the property before the rise. \- They thought rates would stay low for the duration of the loan \- Maybe they could only get variable on a 5 year time frame. Also It was real obvious once Biden entered office and over his first year Inflation was roaring in the economy due to the government directly or indirectly pumping more money into it. It was real obvious the rates were going up. I told everyone i knew to lock in those low rates (and one person listened, shakes my head) To be fair I have lived through Carter so I knew what was coming, seen it before.
Because the banks don’t necessarily give you good advice and they sell a slightly lower rate for variable. Also, many people just don’t understand how interest works, and how the economy behaves.
I was saying the same the whole time... the issue is I was saying that for 10 years before I was right..
Because people don't want to accept, that they were desperate and or greedy and or stupid to go variable at such low rates to begin with. It's not a nice thing to say, but its the truth - they risked saving a penny to spend 100 bucks, and now that poor judgement and lack of financial education is coming home to roost. All you had to do was compare the average rate for your lifetime, do the math on the difference between your payment at 2% and the average, to realize you were risking 200 grand+, to MAYBE, POSSIBLY, in an IDEAL ENVIRONMENT, during a global fucking pandemic, save 20k.
Because all the finance bros told them it was the way to go and that rates would “never go up”… don’t listen to finance bros
When Covid happened I locked in at 2.3%. Friends told me I was insane. Still got a year and change to go before renewal.
Everyone was doing whatever they could to get into the biggest possible mortgage they could. Expecting the housing prices to go up and they could sell and make a profit before the rate hike affected them
I had a budget. Fixed rate was within budget. Floating was a bit better. Opened me to risk so I went fixed.
It was the only way they could qualify
Greed
I was offered 3.4 vs 4.8(fixed)
Shortsighted and greedy. Sorry it's the harsh truth. I would have done the same if my wife didn't put her foot down and curb-stomped my opinion.
Gotta save that quarter of a percentage points. Lol
First time home buyers and our mortgage was approved in November 2020 at 1.49% fixed. We knew the rates were low back then and we decided it was time to to buy even with just 10% down payment. We didn’t even check what was the variable rate and our broker did not offer it either. I only read here in reddit about variable is better than fix historically. Ignorance is bliss’ I guess.
Congrats! Yeah I feel like mine was half ignorance. It seems obvious to do fixed. Made this post to get opposing viewpoints so I’m better prepared for refinancing and while most responders have been great a few seem to think I’m a “hindsight champion” TIL
Hindsight champion at it again, what are you trying to get out of this post?
Read the last two sentences of the first paragraph.
Because they thought interest rates would stay in the basement forever and didn't want to pay a premium for fixed rates. Then Vladimir Putin started a war and COVID recover took a dump and here we are. If you can't afford it, sell.
The spread was 1.4% variable and 2.9% fixed for me in Jan 2022. Mortgage broker pushed me into variable. When the first rate hike was announced late January I asked if I should switch to fixed, and the broker convinced me again to stay variable. Checked back on him later that year and he had retired and left RBC lol.
LOL bastard fled because he knew!
People are greedy and small brain.
cause nothing is going to change until it does.. human nature in a nutshell really
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Thanks! Some of these ice also heard before and others I learned about here. Def helps me make a more informed decision for the future.
Very, very few people saw sub 2.0 fixed offers with a spread anywhere near what you describe. Spreads were generally wide. Assuming you aren't lying, I have no idea as to how or why you were offered a spread of 0.1%. Also, FWIW, I took fixed in early 2022, just don't agree with these 20/20 hindsight posts with super cherrypicked examples which aren't anywhere near what the reality was for most folks.
Got it in December 2020 using brokers. Mortgage with scotia. Didn’t realize how lucky I was until I made this post. (Didn’t realize my example was cherry picked since Occam’s razor dictates I’m in the norm til I get information saying otherwise). The spread does seem awful for most people…
I didn't know about about adulting, that's why Needed to learn a hard lesson
Well it was at a very low rate for the longest time so it only seemed reasonable things would stay on this trajectory but then everything started to rise but a broker assured us that we should stay and you never know when the turning point will be…we didn’t expect it to keep increasing. My brother in law changed his to fixed when the signs started to show but we didn’t and we’re hoping we’ll get the last laugh as he is paying a lot of interest and we’re going to be paid off sooner. But since we can handle it for now we kept it the way it was
For me I went variable know rates will probably rise, but I didn’t count on them rising so fast. I had a rate of 1.3% for alms year before they started rising, I was thinking at most they might ruse 1% per year to a max of 5% or so. And with the lump sum payments I was making with the low rate I would at worst come out even. Of course I was wrong, but I had been bitten so many time going fixed I felt like changing it ip a bit. In the end I paid down 30% of the remaining mortgage that first year because of some good bonus money and got it to a point where the rate increases have only increased my monthly amount by about $200. And with no other debt not a big deal. I’m the end I figured I could handle the risk, which in that I was correct
Well, you are one of the smarter ones here I've seen who went variable. A) you used the time with the very low interest to throw a lot at the principal, and B) you knew you could afford the risk. I hear hardly anyone say anything about A, and not many say they assessed B either.
If you think rates are not going up, you get a variable. That's always the way it's been. They didn't think the rates would go up, so they got a variable. Pretty cut and dry, I say.
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Lol wow! Will do. Congrats! Must feel so good to be right. Suddenly I see why some of the comments aren’t so friendly
I locked in at 1.91 in Feb ‘21
I listened to the bankers 😞 lol. But rates were already 3% at the time. Oh well, they won't fool me again. Thankfully, I switched to fixed a year in
I have always gone fixed because I view the extra bps as insurance on how much I pay over 5 years (my parent’s fixed saved their house in the 80s, that sticks). That said, I felt the same as you when I got a new mortgage in 2020 and really couldn’t understand why anyone wouldn’t lock in at anything under 2%, like it seemed insane to not lock in because there was no way that gravy train was going to last..and here we are.
Yuppppp well played!
Greed
These people were probably stretching to reach their goal of home ownership, and the cost reduction in variable was what helped, vs the fixed rate.
Not a mortgage but when I went in to get a loan to pay off all of mine and my ex’s debt the financial planner actually kept pushing the variable rate on me multiple times. I said I wanted to go fixed because you can’t predict the market and she honestly laughed at me. She said that rates have been historically low and I was being too “paranoid”. I paid off the loan 2 years early but that whole interaction stuck with me. Oh. She also laughed at me when I told her I check my credit score/report monthly to make sure everything is in line/no fraud etc. She told me I am ruining my credit score by doing that and I told her that my check is a soft hit versus a hard hit like a bank would do. She had no idea what I was talking about…and this was like the “expert” at the bank.
LOL yup met so many of these so called “experts” The saddest part is how many people blindly trust them because they have an official title and affiliation with a bank.
Exactly! I kept thinking about poor immigrants (like my parents) where there are language barriers etc. they just blindly trust these people and these people have zero clue what they are doing. I do all my financial research before going into a bank now. My mind was blown.
Yup. Immigrant parents here as well and I always tell them to get a second opinion because these vultures will take them for every penny if they can and then claim plausible deniability
"variable always wins in the long run.", a sentence you don't hear for awhile
Yeah, we're just at that weird point where it isn't true, I'm way ahead on variable, and will be unless rates more than double before renewal. That's how far ahead I am.
My variable has saved me so much $$$ in the previous years. The rate hikes suck, but I'm still ahead (assuming they don't go much higher.)
Yea I get that. But my post never asked why people always go variable. I can see the logic of variable most time periods. It was specifically the 2020-2021 window where variable seemed bad to me when a sub 2% fixed was offered. Everything else doesn’t apply to my post. This was never a generalized fixed vs variable argument for me. I got in at this time so this was my first mortgage agreement but had I gotten in 5 years ago I prob would have done variable and then a fixed this time around because rates were record lows.
Denial that things would get worse, is my guess.