Variable-Rate Mortgage Gamble Puts Borrowers at Risk

Canada's economy rebounded in the spring with second-quarter growth near 3.4 per cent annualized, surpassing the Bank of Canada's forecast.

The strong economic performance has yet to deter borrowers from opting for variable-rate mortgages, with 54 per cent of prime mortgage borrowers choosing floating rates in July, according to Dominion Lending Centres Inc.

The attraction to variable rates is clear: they are now more than a half percentage point below the lowest fixed rates, at around 3.40 per cent or less for insured loans and 3.70 per cent or less for uninsured loans.

Economists expect no Bank of Canada rate hikes through 2026, but markets disagree, pricing a 70 per cent chance of a first central bank rate hike by December.