Fixed rate or variable? As you know, that has long been the pressing question for many Canadians homebuyers.
With a fixed rate, your clients can be secure in the knowledge that their payments won’t change for the duration of their mortgage term. They can essentially “get it and forget it”, making budgeting much easier. A variable rate, on the other hand, fluctuates along with the prime lending rate, meaning that if this goes up, so do your clients’ payments. That said, other than on a couple of occasions, variable rates have been consistently lower than fixed ones.
There are clear pros and cons for both options, but on balance, Canadians tend to favour the security of a fixed-rate mortgage. This has been especially true during the COVID-19 pandemic. According to LowestRates.ca, between March and May 2020, 62.88% of Canadians opted for a fixed-rate mortgage and 37.12% for a variable, compared to 57.73% and 42.26% during the same period last year.
These figures tell us that in these uncertain times, Canadians are craving certainty.
But a lean towards fixed-rate mortgages isn’t the only change in house-buying behaviour we’ve seen during the pandemic. The figures also tell us that Canadians are shying away from buying a new property, with a 13.2% drop in searches for mortgage quotes on LowestRates.ca. Searches for mortgage renewal quotes, however, saw an increase of 10.22%.
This interest in mortgage renewals is likely to do with the three big rate cuts announced by the Bank of Canada in March, which has motivated Canadians to shop around rather than simply accepting the rate offered by their existing lender. Meanwhile, the reluctance to move house is likely connected to the expected drop in house prices, with homeowners choosing to stay put rather than risk selling at an unfavourable price.
How can you react to this new reality?
If this sounds like any of your clients, the CHIP Reverse Mortgage could be a good option for them.
Perhaps they were thinking about downsizing before the pandemic but have since decided that now’s not the right time. With the CHIP Reverse Mortgage, your clients can release the cash that they would have gotten by downsizing – with the added benefit that they get to stay in the home they love.
What’s more, as HomeEquity Bank offers both variable and fixed rates, your clients can choose to have the certainty and peace-of-mind that comes with a fixed rate. Meanwhile, as their advisor, you open up a new stream of income that’ll help make up for the drop in home sales.
The CHIP Reverse Mortgage is also a viable option for clients that are looking to renew their mortgage. They can use the CHIP to pay off their existing mortgage and then put the remaining funds towards whatever they want – whether that’s renovating their home or helping out loved ones who are struggling during the COVID-19 crisis. And because they only have to pay off what they owe once they sell their home or pass away, a Reverse Mortgage also acts as a lifetime mortgage deferral program.
The COVID-19 pandemic has sparked changes in house-buying behaviours in Canada as well as pessimism surrounding the future of the housing market. However, it’s also opened up the opportunity for you to explore exciting new options with your clients.
- Posted by samrat
- On October 28, 2020
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