One-year variable mortgage rates are very rare and few people ever get one. They’re unpopular with lenders as well since they’re not very profitable. In most cases, a lender would prefer to have a client in a longer-term variable mortgage since the borrower remains a client for longer and generates more interest revenue.
Since one-year variable rates are so rare, there’s typically premiums attached, making them a more expensive rate choice. Those wanting a one-year mortgage rate are better off choosing a one-year fixed mortgage, as there are many more options available and the rates are lower.
Variable mortgage rates are tied to a lender's prime rate, which means the interest rate can fluctuate over the duration of the term if the prime rate rises or falls. Fixed rates, on the other hand, provide greater payment stability to borrowers as the rate and monthly payments remain fixed for the length of the term. Learn more about the differences between variable and fixed rate mortgages.
Like any decision you make, there are pros and cons that go along with that decision. Depending on what you're looking for in a mortgage and where you see your mortgage heading after 1 year, here are some of the pros of a 1-year variable mortgage.
And on the other side of pros, there are cons. While these cons aren't necessarily bad, they're some factors to consider.