Talk to any financial planner and almost the first word out of their mouth will be diversification. If not putting all your eggs in one basket makes sense when financial planning, maybe we should think of that when making mortgage decisions. Hybrid mortgages are a great way to diversify your mortgage and get exposure to both fixed and variable rates.
Hybrid or combination mortgages are split 50/50, with half the mortgage being a fixed rate and the other half being variable. Those who select a hybrid mortgage enjoy the safety and security that fixed mortgage rates offer but still get a chance to save on interest should variable rates remain stable or go down. In addition the terms of the mortgage can also be divided and renew at different dates giving even more flexibility.
The Trend Toward Hybrid Mortgages in Canada
According to RBC’s 17th Annual Homeowners Survey, of those who plan on buying a home in the next 2 years 40% want a combination or hybrid mortgage. Currently Hybrids account for less than 10% of the mortgage market with the majority still selecting a fixed mortgage. Though the 40% figure represents what people plan on doing and of course many will not follow through. The figure still shows a growing trend and interest in hybrid mortgages in Canada. This increase in popularity could be due to increased promotion by financial institutions as well as the uncertainty that many people have about the trend in interest rates.
Not all lenders offer combination mortgages but with more people interested you can expect that many of them will be carrying the product in the future. Currently Scotia, RBC, Merix Financial, and HSBC are some of the lenders who offer combinations mortgages in Canada.
