Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials HomeReal EstateMortgagesWhy mortgage brokers tend to favour variable rates over fixedRobert McLister: Banks have a reputation for not selling variable mortgages as frequently as brokersLast updated 1 hour ago You can save this article by registering for free here. 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Photo by Mark Sommerfeld/Bloomberg filesAppetite for variable-rate mortgages keeps growing, depending on where you get your financing.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorGovernment data is hopelessly lagging, so I tend to check my real-time proxy for variable-rate demand: DLCG Mortgage Group (Dominion Lending Centres Inc.). They’re the nation’s largest mortgage company and close roughly one in 10 mortgages.Through mid-June, DLCG numbers show 56.8 per cent of prime applicants opting for floating-rate mortgages.Not only is that up from 35.9 per cent in March, but it’s more than double the 25 per cent long-term bank average, according to Bank of Canada figures.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againAnd notice I specified “long-term bank average” above.Banks have a reputation for not selling variable mortgages as frequently as brokers, at least according to available anecdotal evidence.As of late, that trend seems to be continuing, particularly for creditworthy prime borrowers.In 10 out of the last 12 months, for example, DLCG brokers arranged a higher proportion of variables than banks for prime customers.And compared to DLCG’s 49.8 per cent prime variable-rate share in April, the latest bank data (also from April) showed that just 29 per cent of new bank mortgages were variable.Now, as I mentioned, the fact that brokers favour variables more than banks is not new information, nor is it isolated to one particular brokerage.For well-qualified borrowers, brokers lean more towards variables for multiple reasons.When consumers shop around today, they see banks advertising variable rates like 3.95 per cent, whereas a quick check of a rate comparison website will highlight broker rates as low as 3.74 per cent.And while a single bank may not have leading rates at the moment, brokers have dozens of lenders to pick from, maximizing the chances they’ll beat the average bank.Side note: Past research finds that most people get better deals at brokers, but banks have been catching up, particularly on renewals or when well-qualified borrowers negotiate. At any given time, there may be a few banks that sell for less to well-qualified borrowers on a discretionary basis; the challenge is in finding them.In any case, many rate-sensitive shoppers choose brokers for floating-rate mortgages because they perceive them as more competitive. And that may skew their variable market share.Brokers are the go-to source for harder-to-approve borrowers. They know which lenders are more likely to approve deals, and they understand that the rate you choose can affect your odds of success.Blame the design of the government’s mortgage stress test, which adds at least two percentage points onto your actual rate when a lender calculates your debt ratios.The result is that variable rates — which are usually lower — are more often easier to qualify for.In fact, that is precisely the case today, with floating rates running 55 basis points below fixed. On identical income, that qualifies people for roughly five per cent more mortgage, which in a market this affordability-squeezed is no small feat.Few people are more aware of costly fixed-rate prepayment penalties than mortgage brokers.They know the math and understand that variable mortgages carry smaller break fees — typically three months’ interest rather than the frightful big bank “interest-rate-differential” (IRD) calculation.Brokers routinely recommend variable-rate products as a defensive strategy to shield risk-exposed, mobile, or younger clients from bank IRD penalties.And, in full disclosure, variables also make breaking or switching lenders before maturity cheaper, and the easier switching happens to suit brokers nicely.Banks have been chipping away at the knowledge gap that exists between them and their independent rivals, but brokers simply have more incentive than most bankers to be mortgage experts.Brokers typically:Get no salaryHave little else to sell besides mortgagesHave to generate their own leads, with no branch referrals dropping into their lapSubscribe to independent mortgage intelligence sources far more than bankers, which I know because I sell such intelligence and have a decent read on my competitors’ subscriber breakdownsCan freely present any data they see fit to help clients make better decisions (most are trained to present historical data and studies as empirical justification for floating)Depend on matching borrowers to the best fit from a wide lender menu rather than peddling one institution’s offeringsAll of this typically points to variables as a more borrower-friendly long-term option for clients suited to the risk, although much depends on the rate cycle, available fixed vs. floating discounts, client particulars, and so on.All of which means one should expect brokers to push variable rates harder than banks. Most of the time it works, and some of the time (e.g., 2021/2022) it doesn’t.Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.For the best national insured and uninsured mortgage rates, updated daily, please visit our mortgage rate page here. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.