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“On the surface these results may seem surprising given the current low rate environment and the vast array of new variable and flexible rate products that have been introduced over the past few years,” said Maria Racanelli, Vice President, Personal Banking, BMO Bank of Montreal. “However, it does represent a significant shift in consumer behaviour, because if we had done this survey even five years ago the percentage of homeowners who held a fixed rate mortgage would probably have been in the 90 per cent range.”   

The national telephone survey was conducted between October 15 and October 18, 2004 with 1000 Canadians.  The associated margin of error is /- 3 per cent at the 95 per cent level of confidence.  Please visit www.ipsos.ca for more information.  

Other highlights of the survey include:

• There was little difference between those homeowners in the 18-34 age group and those in the 35-54 age bracket with 70 per cent and 68 per cent respectively choosing fixed rate over variable rate products. However a gap did develop between younger homeowners and older Canadians (55 ) whose preference for fixed rates was only 63 per cent.
• 
  Regionally, Quebec mortgage holders are most likely to hold a fixed rate mortgage product (78 per cent).  By contrast only 62 per cent of mortgage holders in Saskatchewan, Manitoba and Ontario have a fixed rate product. Of the other provinces, 64 per cent of mortgage holders in British Columbia are in a fixed rate product, 67 per cent in Alberta, and 68 per cent in Atlantic Canada.

Sixty per cent of Canadians believe interest rates will rise

The survey also queried Canadians about their opinions on the direction of interest rates and found that a high proportion see rates increasing over the next six months.  Sixty per cent of Canadians believe that rates will rise over the next six months with 8 per cent of the total believing that rates will increase significantly.  Only 6 per cent believe that rates will fall during the next six months. However a substantial 27 per cent of those interviewed expect rates to “remain close to where they are today.”

31 per cent believe rising interest rates will have a negative effect on their future financial decisions

Among those Canadian homeowners who believe rates will increase, some 31 per cent indicate the increase will have a negative impact on their financial decisions.  Once again there were substantial differences between the age groups in their opinion on the overall impact that rate hikes will have on their future financial decisions.

40 per cent of those mortgage holders in the 18-34 age group said that interest rate increases will have a negative effect on their future financial decisions.

32 per cent of those in the 35-54 age group expressed concern about the negative impact of rising rates.

Only 22 per cent of those homeowners in the 55 age group believe rate increases will have a negative impact on their future financial decisions. 

“There is a great deal of uncertainty in the marketplace today about interest rates and how quickly they will rise,” said Racanelli.  “It does however reinforce the need for home buyers and mortgage holders to develop an interest rate strategy that will allow them to manage the rate risks.”

Racanelli points out there are many products available that can help manage the upside risk to rising interest rates such as a five year protected (capped) variable rate mortgage.  She advises mortgage holders to work with a BMO mortgage representative to put together a strategy that allows them to achieve peace of mind while at the same time saving money or paying off the home faster. 

“The best advice we can offer our customers is to come and speak to us about developing a strategy that meets their individual needs,” she said.

Detailed breakouts of BMO Financial Group/Ipsos Reid Survey

Type of Mortgage

Impact of rate increases expectations on future financial decisions