Navigating rising mortgage rates: What homeowners need to know

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Know what type of mortgage is right for you as rates are changing.

Mortgage rates are on the rise again, prompting concern—and questions—from homeowners and buyers across the country.

After a brief dip earlier this month that saw high-ratio fix-year fixed rates fall as low as 3.64%, the market has since reversed course. Fixed rates, both insured and uninsured, have crept up by 10 to 20 basis points and the trend is consistent across the board.

But it’s not just fixed rates that are being affected. Variable-rate mortgages, once a popular choice for their lower interest rates and flexibility, are becoming more expensive in their own way. The discounts typically offered off the prime rate—currently sitting at 4.95%—are shrinking.

Major lenders like CIBC and Scotiabank have reduced their variable-rate discounts, and this shift is happening gradually across the entire industry.

This rising-rate environment comes at a time of broader economic uncertainty. Global trade tensions, tariffs, and stock market volatility are all contributing to an unpredictable financial landscape. For Canadians navigating mortgage decisions, this uncertainty complicates the choice between fixed and variable rates.

Still, it’s not all bad news for those considering variable rates. Despite current variable-rate pricing inching higher due to smaller discounts, many industry experts believe these rates could ultimately fall in the months ahead. That’s because the Bank of Canada is expected to continue lowering its policy rate in response to broader economic concerns. If the bank cuts aggressively later this year, today's variable-rate borrowers could end up paying less interest overall compared to those locked into higher fixed rates.

The key, however, is understanding whether a variable-rate mortgage is right for you. If your financial situation can handle some fluctuation—and you're not overly risk-averse—choosing a variable rate today may prove cost-effective over time.

"Broadly speaking, if a fluctuating mortgage rate won’t put you under worrying financial pressure and if you are comfortable with the inherent uncertainty of a variable rate, I think the variable rate will likely prove to be the cheapest option,” one expert noted.

In addition, variable rates often offer greater flexibility, making them ideal for homeowners expecting a major life change—like a move or job relocation—within the next few years. Variable mortgages tend to come with significantly lower penalties for breaking the term early, which can be a substantial financial advantage.

For homeowners already facing increased payments due to rising rates, here are some practical steps to consider:

1. Review and assess your financial health: Begin by examining your current income, expenses, and financial obligations. Understanding how rising mortgage payments impact your monthly budget is critical to managing them effectively.

2. Adjust your budget: Create or revise your budget to reflect the new reality. Prioritize essential spending and look for opportunities to reduce discretionary costs. These savings can be redirected toward your mortgage or other financial goals.

3. Consult a mortgage broker: Seeking professional advice is one of the most effective ways to navigate changing mortgage conditions. A qualified mortgage broker can offer personalized strategies for managing your mortgage payments, consolidating debt, or even switching products to better align with your long-term goals.

It’s important to remember variable-rate mortgages should not be used as a short-term tactic to “time” the market. Instead, they are best viewed as a long-term strategy for borrowers who value flexibility and can tolerate some level of financial unpredictability.

As we move through this shifting mortgage landscape, informed decision-making will be key. Whether you’re a first-time buyer or a seasoned homeowner, understanding your options and adapting your strategy can help you weather this period of rising rates—and potentially come out ahead.

Please reach out to me at [email protected] if you would like some guidance or you can always book a time for a chat on my calendar. Go to calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.