The number of Canadians considering mortgages with both fixed and variable rate segments is on the rise, according to a survey from RBC Royal Bank.

Over one third (38%) of Canadians who are likely to purchase a home within the next two years plan to take out a combination mortgage, compared to 30% in 2006.

At the same time, the RBC poll found that many Canadians are confused about the various mortgage options now available to them. A majority (66%) responded that they found it difficult to choose between a fixed rate and a variable rate.

Poll results also revealed that, even when Canadian homeowners planning to choose a fixed rate mortgage were informed they could pay less interest overall through a combination or variable rate mortgage, only 12% indicated they would be much more likely to choose combination or variable. The top reason cited for not opting for a variable rate was the preference for payments that don’t change every month (30%). Seventy-six per cent of Canadians believe that their regular mortgage payments will change when the prime rate changes, if they take out a variable rate mortgage.

“The research suggests many Canadians think that only fixed rate mortgages provide predictability of payments. But in reality, variable rate does not necessarily mean variable payment,” said Catherine Adams, vp, home equity finance, RBC Royal Bank. “There are variable rate mortgages that are designed to keep the payment stable. When interest rates go up, your payment will pay off more interest than principal; when interest rates go down, your same payment will pay off more principal than interest.” Fixed rate mortgages continue to be the most common choice for potential buyers and current mortgage-holders across the country – preferred by 49% of Canadians likely to buy a home within the next two years and 54% of Canadian homeowners with mortgages they plan to renew. Atlantic Canadians planning to buy are most likely (69%) to opt for a fixed rate; Albertans planning to buy are the least likely (41%) to choose a fixed rate.

“We find that many Canadians automatically opt for a fixed mortgage with a longer term, until they begin to explore the upside potential of combining multiple mortgage segments under one plan,” explained Adams. “As consumers begin to learn about the benefits that mortgage diversification can bring, we’re seeing more homebuyers gaining a better comfort level with including variable rate mortgage options.”

Adams emphasized that exploring all the mortgage options now available requires doing some homework. “Typically people will spend more time planning their vacation activities or financing their next vehicle, than understanding how best to maximize their mortgage,” added Adams. “This is a great example of a personal finance area where a little investment of your time can save you a substantial amount of money down the road.”