Canadian mortgage term choices carry more risk than borrowers realise
A further 25% of mortgage consumers said they had regrets about the mortgage characteristics they selected, a figure that illustrates how quickly an apparently routine financing decision can become a source of lasting financial strain.
For brokers tracking the fixed and variable rate debate on behalf of their clients, the survey results point to a gap between product selection at the time of origination and borrower preparedness when conditions change.
Risk that travels with the borrower
Canada’s mortgage system is structurally different from those in the United States and much of continental Europe, where long-term fixed-rate products allow lenders, not households, to absorb the bulk of interest rate risk.
Countries such as Australia, New Zealand, and the United Kingdom operate more similarly to Canada, relying heavily on variable and short-term contracts.
The result is that Bank of Canada policy rate changes pass through to borrowers more rapidly here than in markets where 30-year fixed terms are the norm. That transmission speed works in borrowers’ favour when rates fall, but amplifies exposure when they rise.
