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3-Year Variable Mortgage Rates

Mortgage Rate Mortgage rate The rate of interest you will pay on the outstanding balance of your mortgage. This rate can be fixed for the duration of the term or variable, fluctuating with the prime rate. Fixed rates are most popular in Canada and represent 66% of all mortgages.	Provider Provider Mortgage providers include lenders and mortgage brokers. As the name suggests, lenders provide the funding for your mortgage. Mortgage brokers are licensed professionals with access to multiple lenders and products. According to the Canadian Mortgage and Housing Corporation, mortgage brokers accounted for 38% of mortgage originations in 2009.	Rate Hold Rate hold The rate hold is the time period, between 30-120 days, before your mortgage renewal date you are able to lock in the current mortgage rate. If rates go down further within this period, however, many lenders will honour the lower rate.	Pre-Payment Prepayment Prepayment options outline the flexibility you have to increase your monthly mortgage payments or make a lump sum outlay against your mortgage as a whole. According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), 28% of mortgage holders used one or both prepayment privileges in 2010.	Payment Payment The monthly mortgage payment is calculated based on the mortgage amount, amortization period and the associated mortgage rate. A general affordability rule is that your monthly housing costs should not exceed 32% of your gross household monthly income.
2.80% Prime - 0.20	Family Lending	60 days	Lump Sum: 15% Monthly: 15%	$- Get Details
2.90% Prime - 0.10	Dominion Lending Centres	60 days	Lump Sum: 20% Monthly: 20%	$- Get Details
2.99% Prime - 0.01	Safebridge	60 days	Lump Sum: 20% Monthly: 20%	$- Get Details
3.00% Prime - 0.00	Laurentian	90 days	Lump Sum: 15% Monthly: 15%	$- Get Details
3.70% Prime + 0.70	Bank of Montreal	90 days	Lump Sum: 20% Monthly: 20%	$- Get Details

3-year Variable Mortgage Rates Ontario

A variable rate mortgage is driven by the Canadian Prime Lending rate set by the Bank of Canada. It is a dynamic rate meaning it fluctuates with the market rate. The 3-year term is a common choice for Canadians looking for a variable mortgage rate. The mortgage payments can be set up one of two ways:

1) A set payment is where the mortgage payments remain constant. What changes is the interest portion within the payment itself. For example, if interest rates go up, more of the mortgage payment is applied to the interest payment and less to the principal. The total amount due remains the same.

2) A dynamic payment is where a fixed sum is applied to the principal portion only. The interest portion of the payment changes as interest rates move, thereby increasing or decreasing the overall mortgage payment due. For example, if interest rates go up, the total mortgage payment due also increases.

Connotation

A variable rate is usually expressed as “prime plus or minus a particular percentage amount”.

Example: Assuming the current prime rate of 3.00%, we would read the variable rate “Prime -0.85%” as 2.15% (3.00% - 0.85%)

What drives changes in Ontario 3-year variable mortgage rates?

The three-year variable rate fluctuates when there is movement in the Canadian Prime Lending Rate. The Bank of Canada makes adjustments to the prime rate depending on the environment of the economy (which is determined by such factors as unemployment, manufacturing and exports). Together, these help shape the inflation rate. When inflation is low, the Bank of Canada must act to avoid an under-stimulated economy. The prime lending rate will decrease to make the act of borrowing money more attractive. When inflation is high, the prime rate will increase to discourage an over-stimulated economy. The variable mortgage rate is set by Canadian banks at either a discount or a premium to the Prime Lending Rate which is determined by competition and strategy.

Popularity

Mortgage Chart by Type and Age Group:

MORTGAGE TYPE	AGE GROUP
MORTGAGE TYPE	18-34	35-54	55+	All Ages
Fixed Rate	69%	64%	67%	66%
Variable Rate	27%	32%	30%	29%
Combination	4%	4%	3%	4%

Source: CAAMP "Annual state of the Residential Mortgage Market in Canada" 2010

Fixed rate mortgages make up 66% of the market, but a significant minority do have variable rate mortgages - and as recent reports show, that number is rising. Fixed rates are common among first-time home buyers because they prefer stability in their mortgage payments. The seasoned home buyers (i.e. older age groups) are more likely to take on the risks and opt for a variable rate. The 3-year variable rate is usually lower than the slightly more popular 5-year variable rate.

Comparing Ontario 3-year variable mortgage rates

A variable interest rate does not offer rate stability, but it has, historically over time proven to be a lower rate. No one can predict the direction interest rate will move and for how long with certainty. Those averse to risk will avoid the variable rate mortgage, but for those capable of handling the risk can take on the variable rate. These buyers will look to the benefit of paying lower interest, but must factor in the possibility of a rate increase into their budget. If the spread, which is the difference between the fixed and variable rate, is significant, it may not be worth it to select a fixed rate. However, most people choose to avoid possible risk in their mortgage payments, which is why fixed rate mortgages are slightly more popular.

Variable Rate Mortgage Forecast

The Prime Lending rate is currently at 3.00% and the ten year average of prime is 4.33%. Popular opinion amongst the leading Canadian banks estimate if accurate, predict a 4.50% prime rate by the end of 2012.

Average Prime Rate in Canada: 4.31%
Highest Prime Rate observed: 6.25% on Wednesday, June 27th 2001.
Lowest Prime Rate observed: 2.25% on Wednesday, April 22nd 2009.

Average 3-Year Fixed Mortgage Rate in Canada: 5.81%
Highest 3-Year Rate observed: 7.55% on Wednesday, December 26th 2007.
Lowest 3-Year Rate observed: 4.00% on Wednesday, October 20th 2010.

Source: Canadian Mortgage Trends and CanEquity

Mortgage Amount: Mortgage Amount If you are a first-time homebuyer, the mortgage amount is the price of the home you intend to purchase, minus your down payment. If you are renewing or refinancing your mortgage, this is the value of your the mortgage.	Type:		Term: Term The mortgage term is the amount of time a home buyer commits to the rules, conditions and interest rate agreed upon with the lender. The term can be anywhere from six months to 10 years, with a 5-year mortgage term being the most common duration.
	Province:		Amortization: Amortization The amortization period is the length of time it takes to pay off your mortgage in its entirety. The most common amortization period is 25 years, with the maximum set at 30 years for down payments less than 20%. Although longer amortization periods reduce your monthly payments, you will pay more interest over the life of your mortgage.