CIBC Poll: Canadians locking into fixed rate mortgages this spring on expectations that low rates can't last forever

Despite the latest Bank of Canada call, almost half of Canadians surveyed expect higher rates next year

TORONTO, April 16, 2014 /CNW/ - Despite the Bank of Canada today holding its key interest rate steady for the 29th consecutive time since September 2010, a recent CIBC (TSX: CM) (NYSE: CM) poll conducted by Nielsen finds that nearly half of Canadians don't think low rates will last forever and expect mortgage rates to be higher a year from now. The poll also shows that Canadians are increasingly focused on moving to fixed-rate mortgages.

The key highlights of the poll include:

  • 47 per cent of Canadians think mortgage rates will increase in the next 12 months, up from 38 per cent who felt that way last year;
  • 48 per cent would choose a fixed rate mortgage if they had to make that decision today, the fourth year in a row that fixed mortgages have been the choice of Canadians;
  • 31 per cent would choose a variable rate mortgage today; and
  • 19 per cent were undecided as to which type of mortgage they would choose.

"Even though we've had a relatively stable rate environment for a number of years, Canadians are being prudent when it comes to mortgage planning and are factoring in the possibility of higher rates in the near future," says Barry Gollom, Vice-President, Secured Lending and Product Policy at CIBC. "With fixed rates near historic lows, Canadians see an opportunity to lock in for a number of years in order to reduce the risk of expected higher interest costs."

With interest rates as low as they are now, homeowners can take advantage of the opportunity to accelerate their mortgage payments. For example, one strategy is to set your mortgage payment at the amount it would be if rates were 1-to-2 per cent higher. Not only will this help pay down the principal faster, but it prepares you for future rate increases, says Mr. Gollom.

New homeowners looking for greater predictability

The poll also revealed that younger Canadians were even more likely to choose a fixed mortgage, with 56 per cent of Canadians aged 25-34 saying they would lock in to a fixed rate today, a number that has been steadily increasing over the last four years. In contrast, more established homeowners (aged 45-54) were among those less likely to lean towards a fixed rate (43 percent).

"For those that have recently taken out a mortgage, and may have additional expenses or hold other debt, the predictability of a fixed mortgage rate may be more appealing," says Mr. Gollom.  "However those who have paid off a sizeable portion of their mortgage are likely less sensitive to rate changes."

"As part of any long term mortgage strategy, homeowners at all stages should consider their tolerance for fluctuating rates when deciding on whether to choose a fixed or variable rate - as both have their place," he adds.

Finding the right mortgage is about more than rates

With nearly one in five Canadians (19 per cent) undecided about which type of mortgage rate they would choose, it highlights the importance of talking to an advisor to understand your options.

"Although deciding between a fixed and variable rate is an important component in selecting a mortgage, there are other factors to consider, such as flexible repayment options," Mr. Gollom says. "An advisor will look at your overall financial picture, and help you select the right mortgage for you."

KEY POLL FINDINGS

Percentage of Canadians who believe mortgage rates will be higher 12 months from now, by age:

  2014 2013 2012 2011
National 47% 38% 44% 61%
18-24 49% 41% 50% 65%
25-34 49% 41% 48% 60%
35-44 55% 35% 40% 60%
45-54 43% 36% 42% 63%
55-64 42% 40% 47% 60%
65+ 42% 37% 42% 57%

Percentage of Canadians who believe mortgage rates will be higher 12 months from now, by region:

  2014 2013 2012 2011
National  47% 38% 44% 61%
Atlantic Canada 44% 42% 56% 64%
Quebec 32% 33% 39% 54%
Ontario 51% 39% 44% 66%
Manitoba and Saskatchewan 49% 46% 48% 54%
Alberta 56% 38% 50% 57%
British Columbia 56% 40% 38% 63%

Percentage of Canadians who would choose a fixed rate mortgage today, by age:

  2014 2013 2012 2011
National 48% 45% 50% 39%
18-24 47% 39% 59% 44%
25-34 56% 54% 51% 40%
35-44 53% 46% 55% 51%
45-54 43% 45% 50% 41%
55-64 47% 46% 50% 38%
65+ 43% 35% 44% 22%

Percentage of Canadians who would choose a fixed rate mortgage today, by region:

  2014 2013 2012 2011
National  48% 45% 50% 39%
Atlantic Canada 50% 37% 63% 43%
Quebec 48% 45% 51% 45%
Ontario 48% 41% 49% 35%
Manitoba and Saskatchewan 47% 64% 46% 33%
Alberta 42% 47% 49% 36%
British Columbia 51% 49% 48% 38%

Each week, Nielsen Consumer Insights interviews just over 1000 Canadians through teleVox, the company's national telephone omnibus survey. These data were gathered in a sample of 1,015 Canadians between February 6-10, 2014. A sample of this size has a margin of error of +/-3.1%, 19 times out of 20. Some sample sizes for regional and age groups under Key Findings are smaller than typically reported and provided only as reference data.

About CIBC

CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, and has offices in the United States and around the world. You can find other news releases and information about CIBC in our Media Centre on our corporate website at www.cibc.com.

 

 

SOURCE CIBC

For further information:

Caroline Van Hasselt, Director, External Communications, 416-784-6699 or caroline.vanhasselt@cibc.com