A local realtor believes a couple more interest rate cuts from the Bank of Canada will help homeowners be able to consider a variable rate mortgage.
Dan Gemus, broker and owner of The Dan Gemus Real Estate Team and host of AM800's The Dan Gemus Real Estate Show, says over the past six to 12 months, people have been staying far away from a variable rate.
"It's now in territory where you can match up, and in fact, with another couple of rate reductions expected this year, it makes sense to look at a variable rate again. You're about 4.40 {per cent} for a variable rate, right, and you can get a 5-year {mortgage} for about the same rate," he told AM800's The Shift with Patty Handysides.
The Bank of Canada delivered another interest rate cut Wednesday, reducing its policy rate by a quarter-percentage point to three per cent.
It's the central bank's sixth straight cut since June, with inflation sitting around two per cent.
Gemus says variable rates are making sense again.
"We're expecting, economists are calling for possibly two more rate cuts again this year, so it would drop down another half a point," he says.
Gemus says that every drop has helped spur some attention in the real estate market over the past year, especially after the rates hit their peak.
"They've now come back down, and you're looking at a variable or a five-year mortgage in the low to mid-fours, which is not horrible. It's not helping with affordability, obviously, but the interest rates have come down drastically," he says.
The Bank of Canada says the cuts are having an impact, with lower interest rates boosting household spending and the economy expected to strengthen.
A variable-rate mortgage will fluctuate with the prime rate throughout the mortgage term, which impacts the amount of principal you pay off each month.
When rates on variable interest rate mortgages decrease, more of your regular payment is applied to your principal, but if rates increase, more of your payment will go toward the interest.
A variable-rate mortgage typically offers more flexible terms than a fixed-rate mortgage.