Almost half of Canadian homeowners and prospective homebuyers expect mortgage rates to head up in this year, while two in five think rates will remain the same, according to a poll published Monday.

Homeowners think the five-year posted mortgage rate will rise only moderately, to an average of 6.64%, from about 6% at the time of the poll, according to the survey conducted for CIBC. It showed 48% think rates will be higher a year from now, while 41% said they will be unchanged; only 3% said they thought rates would be lower.

Most homeowners and prospective homebuyers (57%) believe they would save more over the longer term with a variable-rate mortgage. Despite this, the majority of homeowners and potential homebuyers (55%) think a higher-rate, fixed-rate mortgage is the best strategy to follow given current interest rates.

“The overwhelming majority (81%) of homeowners say they can afford their mortgage payments, even if rates go up by 1% or 2%,” said Paul Mims, vice president, CIBC Mortgages and Lending, in a statement. “On average, homeowners say mortgage rates need to reach 9.75% to become unaffordable, and that doesn’t look like it’s in the cards anytime soon.”

“Most Canadian homeowners think that a variable-rate mortgage can save them money and we are seeing more of them choose that type of mortgage,” said Mims. “But some people would rather pay a bit of a premium to have the security of a fixed rate.”

A recent CIBC economic report noted that for 89.3% of the period from 1985 to 2004, a variable-rate mortgage offered savings compared to a five-year fixed-rate mortgage. Only about one in four (27%) Canadian homeowners with a mortgage currently have a variable-rate mortgage.

The poll was conducted by The Strategic Counsel between Jan.25 and Feb. 1, 2005 and was based on a randomly selected sample of 2,150 English and French speaking Canadian household decision-makers (2,003 current homeowners, 147 current renters who are potential homebuyers).