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Fix or float is the big mortgage question as Bank of Canada rate cuts approach



As the Bank of Canada prepares to cut interest rates, Canadian homeowners face a critical decision: should they opt for fixed or variable mortgage rates? The anticipated rate cuts aim to stimulate the economy, potentially reducing borrowing costs.


Currently, the gap between five-year fixed and variable rates is about 80 basis points. Variable rates might offer significant savings if the Bank of Canada's cuts align with market forecasts. For instance, a $500,000 variable mortgage could save around $6,000 in interest over five years compared to a fixed rate.


However, fixed rates provide stability and easier qualification under Canada's mortgage stress test. Three-year fixed terms are popular due to their balance of short-term higher rates and the potential for refinancing at lower rates later.


Homeowners must weigh potential savings against the security of fixed rates, considering their financial situation and risk tolerance.


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