Merrill Lynch Thinks Canadians are in Trouble; are we?

A recent report by the Bank of America Merrill Lynch report has gotten some Canadians worried, as the report states that those of us carrying a floating rate mortgage are in trouble. A floating rate mortgage is one that “floats” and moves with the interest rate. Or rather as most of know it, a variable rate mortgage. The report stated that two-thirds of Canada mortgages work on a floating rate. And that means big trouble, according to the report, because we’re that much more vulnerable to any interest rate stated by the Bank of Canada. But do we really have reason to be worried?
In short, no. The report does paint an unpleasant picture, that’s for sure. And it does go in-depth explaining how for the past decade, it’s been generally known that variable rates are much less costly than fixed rates. But, the report also goes on to say, that that’s no longer the case; and that getting Canadians to cozy up to the idea that they’ll no longer receive the cheap floating rate is going to be difficult, if not impossible. But, even with a fixed rate mortgage, the Bank of America Merrill Lynch says, a homeowner could find themselves in serious danger of losing their homes if the interest rates climb even 2% higher.
So again, why aren’t we scared?
Simply put, because the interest rates aren’t going anywhere until at least 2013, as recently announced by the Bank of Canada. And yes, the discounts on fixed rates are very good right now, making them very viable mortgage options. But variable rate mortgages still have a lot to offer, and a lender or mortgage broker will be able to assess your situation and recommend one that’s best for you.
Whether you end up choosing a variable rate or a fixed rate though, now is a great time to get a great deal on your mortgage!