Most consumers in Canada are not certain how the mortgage rates will change in near future. Additionally, most consumers are also not sure whether the fixed or the variable rates will serve their financial needs better. As such, selecting the 1 year fixed rate gives you the opportunity to observe the market.
It’s certain that the 1 year fixed mortgage rates are usually lower as compared to the 5 year fixed mortgage rates in flat or falling interest rate surroundings. Some consumers continue to lock into the 1 year fixed mortgage rates year after another. You can achieve the same strategy via the variable mortgage rates since they are usually lower compared to a 1 year fixed mortgage rates and can also be converted to the fixed mortgage rate without any charge.
About 1 out of 16 borrowers pick the 1 year mortgages in Canada, meaning that it is the least popular, in spite of the popularity of fixed rate mortgages. Fixed rate mortgages have a popularity of about 66% in the market while the 1 year fixed rate mortgages have only 6% dominance in the Canadian market. Its popularity also doesn’t vary much with time.
In order to get the 1 year mortgage rate term, most lenders would require you to prove that you are in a position to make payment with reference to a qualifying rate, such as a 5 year fixed rate.
The 1 year fixed mortgage rates is among the shortest mortgage term commitments and people chose it due to four main advantages:
1 year mortgage also does have some disadvantages: