Variable-rate mortgages were coming back into favor in Canada to close out 2024, said Bank of Montreal (BMO).

Variable mortgages made up 32% of new mortgages in December versus just under 28% of all outstanding
mortgages in Canada, noted the bank.

After shrinking on a proportional basis since the start of 2023 -- as variable rates peaked -- the use of variable-rate mortgages is expanding again, stated BMO.

While shorter-term -- usually two- or three-year -- fixed mortgages have still been most popular, five-year fixed mortgage borrowing has crumbled, pointed out the bank. In a nutshell, few Canadians want to
lock in right now with variable rates down to five-year fixed levels again.

BMO would also argue that, given economic uncertainty and inflation roughly around the Bank of Canada's target, the risk of a significant move in rates to the downside is probably greater than a significant move in rates to the upside.

From a qualification perspective, the variable option was a major hurdle when those rates were as much as 200bps higher than fixed rates, but the BoC easing cycle has now almost completely closed that gap, pointed out BMO.