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The federal government has discontinued the First-Time Home Buyer Incentive, a much-criticized program aimed at improving housing affordability for new buyers that saw muted uptake in major markets.

Canada Mortgage and Housing Corporation (CMHC), the national housing agency, said in a statement on its website that the program was winding up, with no new or updated submissions to be accepted after midnight ET on March 21.

Applications resubmitted after that date will be subject to a manual review, with review requests to be submitted no later than midnight ET on March 25 and no new approvals to be granted after March 31.

Introduced in 2019, the Incentive was aimed at reducing monthly mortgage payments for qualified first-time buyers through a shared-equity scheme. It offered a contribution of 5% or 10% towards the purchase of a newly constructed home, and 5% of the purchase of a resale existing home or new/resale mobile or manufactured home.

Still, that shared-equity component, which meant the government would also benefit from the potential future sale of a home, proved unpopular with buyers, who would have to repay the Incentive either after 25 years or upon sale.

The program faced challenges from the off. In 2020, federal Conservative MPs Tom Kmiec and Stphanie Kusie slammed its cost and low levels of consumer interest, urging CMHC to topdeo the scheme,  after an annual report showed its uptake lagged far below projections.

Mortgage Professionals Canada (MPC) also criticized the Incentive at its 2022 summit, when vice chair Veronica Love said the scheme was “simply failing” with data showing participation in the program was less than a third of what the government had originally envisaged.

Between its launch in September 2019 and the end of March 2021, the program had seen  LESS THAN 10,000 sucessfull applicants across Canada with Edmonton and Calgary accounting for nearly 2,000 of that total.


Understanding Fixed vs. Variable Rate Mortgages
 November 15 2023     Posted by John C Filice

Understanding Fixed vs Variable Rate Mortgages

If you're on the cusp of getting a mortgage, or if you're considering refinancing, you've likely encountered the terms "fixed rate" and "variable rate" mortgage. These are the two primary pathways in the mortgage landscape, and choosing between them can feel like standing at a crossroads. Let's unpack these options together, so you can stride forward with confidence.

Fixed Rate Mortgages: A Comforting Choice

Imagine walking outside on a chilly fall morning, wrapped in your favorite blanket-that's a fixed rate mortgage. It's stable, predictable, and you know exactly what to expect: no surprises, no sudden chills.

A fixed rate mortgage locks in your interest rate for the entire term of your mortgage. Whether that term is 2, 5, or even 10 years, your payments remain unchanged throughout that period. It's the go-to option for those who sleep better at night knowing their mortgage payment is set in stone, unaffected by the ebb and flow of the market.

The Pros:

  • Predictability: Budgeting is a breeze when you know your payment amounts won't change.
  • Simplicity: Fixed rates are easy to understand, which is a breath of fresh air for first-time buyers.
  • Stability: If interest rates skyrocket, you'll be positioned with your rate firmly in place.

The Cons:

  • Higher Rates: Fixed rates are often higher than the initial variable rates because you pay a premium for stability.
  • Less Flexible: Breaking a fixed mortgage can be costly due to higher prepayment penalties.
  • Opportunity Cost: If rates decrease, you could be paying more than necessary.

Variable Rate Mortgages: Riding the Financial Wave

Now, let's switch gears to the variable rate mortgage. If fixed rates are a comforting blanket, variable rates are more like surfing-thrilling and potentially rewarding but with a bit more uncertainty.

A variable rate mortgage fluctuates with the market. In Canada, this rate is tied to the lender's prime rate, which moves in tandem with the Bank of Canada's policy interest rate. Your mortgage payments will change whenever the prime rate changes. Some find this unsettling, while others see it as an opportunity to capitalize on lower interest rates.

The Pros:

  • Lower Rates: Usually, variable rates are lower than fixed rates initially, potentially saving you money.
  • Potential Savings: If interest rates go down, your payment amount might decrease.
  • Flexible: Variable mortgages often come with lower prepayment penalties than fixed mortgages.

The Cons:

  • Uncertainty: Rates can increase, potentially raising your monthly payments.
  • Complexity: Requires a closer watch on the market and an understanding of economic factors.
  • Risk: Not ideal for those who prefer stability and predictability in their monthly budget.

Which Type of Mortgage is Right for You?

Choosing between fixed and variable rates is not just about crunching numbers-it's about your comfort level with risk, your financial goals, and how you handle the unexpected. Here are a few scenarios for you to consider:

Go Fixed If:

  • You Prefer Certainty: If the thought of fluctuating payments sends shivers down your spine, fixed is the way to go.
  • You're on a Strict Budget: Fixed rates make sense if you have less flexibility in your monthly spending.
  • You Believe Rates Will Rise: Locking in a rate now could save you money if you think rates are going up.

Go Variable If:

  • You Want to Save Money Initially: A lower starting rate can mean significant savings-at least in the short term.
  • You Can Handle Fluctuation: If your budget can handle potential increases in payments, variable rates could work for you.
  • You're a Rate Hawk: If you're financially savvy and ready to refinance should rates change significantly, variable rates can be advantageous.

Consider the Economic Climate

Understanding the current economic environment is critical. If the economy is heating up, interest rates may rise to cool inflation-a point for fixed rates. If the economy is struggling, rates may decrease to stimulate spending-a tick for variable rates.

The Conversion Option

Some variable rate mortgages offer the flexibility to convert to a fixed rate during the term. This can be a safety net if you start with a variable rate and then decide you'd rather not ride the waves anymore.

Ask the Right Questions

When you're discussing your options with a mortgage broker, ask questions. A lot of questions! What is the penalty for breaking my mortgage? Can I make extra payments, and if so, how much? What's the process if I want to convert my variable rate to a fixed rate?

Final Thoughts

There's no universal right or wrong choice when it comes to fixed vs. variable rate mortgages. It all boils down to your personal situation, your risk tolerance, and the economic outlook. Both paths lead to homeownership. They just offer different scenery along the way.

Remember, a mortgage is one of the biggest financial commitments you'll make. Take your time, do your homework, and don't be afraid to ask for professional advice. That's what mortgage professionals are here for!

Whether you decide to anchor down with a fixed rate or sail with a variable rate, make sure your choice fits not just your wallet, but your peace of mind, too.

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