The Best Current Mortgage Rates in Alberta

Mortgage rate trends in Alberta (2020-2024)

Over the past four years, Alberta’s mortgage rates have experienced fluctuations influenced by economic cycles, central bank policies, and local housing dynamics.

Fixed rates offer more value than variable rates for the first time in decades

Rates for fixed rate mortgages were lower than variable rate mortgages during the spring housing market of 2024.

In March 2022, the Bank of Canada made several rate increases in quick succession. This prompted mortgage lenders to sharply raise the rates on variable mortgages. This is because the Bank of Canada’s key interest rate influences banks’ prime rates. Variable rate mortgages change with the mortgage lenders’ prime rates

Interest rates on fixed rate mortgages, however, are set according to current bond yields. By late 2022, bond yields were lower than banks’ prime rates. This led to fixed rates being lower than variable rate mortgages; usually, the inverse is the case.

The first rate cut in four years inspires optimism, but inflation concerns remain

The Bank of Canda cut its key interest rate by 25 basis points in early June. Looking ahead, there’s a possibility variable rate mortgages could continue falling in the second half of 2024. If additional cuts are made, we may see more people opting for variable rate mortgages.

However, this scenario – lower mortgage rates all around – may not play out as quickly as many would hope. Inflation remains a persistent issue in Canada, which means the central bank may press pause on making any changes to interest rates while they observe how things play out.

Alberta’s housing market trend

Alberta’s housing market has experienced notable shifts in recent years.

1) Interest rate hikes impacted mortgage loan sizes in 2023

In 2023, the size of mortgage loans in Alberta was slightly lower year over year, Canada Mortgage and Housing Corporation (CMHC) data shows. This was likely the result of the Bank of Canada’s decision to make numerous interest rate hikes in 2022 (six in total) and 2023 (three in total). People qualify for smaller mortgages when borrowing becomes more expensive.

2) Demand is steady amid Alberta's surging population

However, one thing has remained constant in Alberta: demand for housing. Steady population growth is the main driver, which is stronger in Alberta than anywhere else in Canada. Immigration has fuelled the explosion in immigration. Housing in Alberta is currently relatively more affordable than other parts of the country, making it an attractive place for people to put down roots.

3) Interprovincial migration is shaping the housing market

In 2023, a substantial portion of Alberta’s newest residents – 27% – were interprovincial migrants, from Ontario and B.C. primarily. This is notable because interprovincial migrants, who are shut out of the real estate market in their home provinces, come prepared to buy property.

4) The 2024 housing market is shaping up to be more competitive than ever

It's no surprise then that the start of the 2024 spring housing market in Alberta was described as more competitive than the last year’s given persistently low housing inventory.

The Bank of Canada’s June 2024 decision to lower the key interest rate to 4.75% has inspired optimism amongst homebuyers and stoked the already hot Alberta housing market. It’s the first cut since 2020 and buyers are excited.

5) The Bank of Canada’s June 2024 rate cut had immediate effects for some homeowners

However, it might take some months for the rate cut to materialize into significant mortgage rate reductions for holders of fixed-rate mortgages (variable rate mortgages saw an immediate reduction). In the meantime, limited housing supply, increased demand will contribute to steady price growth.

Average home prices in Alberta (2023–2024)

The key findings from the Canadian Real Estate Association’s (CREA) housing market data for Alberta include a 9.3% increase in the benchmark home price to $514,200, an 8% rise in the average home price to $502,625, and significant sales growth across all property types with a 15.7% increase in transactions worth a total of $4.8 billion.

Here are more takeaways from the data.

• Home values in Calgary continue to grow; buyers are flocking to Alberta's biggest city, even though prices are considerably lower in Edmonton, the capital. In May 2024, there was just over one month of housing supply, according to the Calgary Real Estate Board (CREB).
  
• Calgary remains the most popular spot to buy. However, the largest price gains were found elsewhere. Central Alberta, South Central Alberta and Medicine Hat all saw double-digit increases. Inventory is low in Calgary, which means out of town buyers are looking beyond Alberta’s biggest city. However, there aren’t many listings in Central Alberta, either, which is driving up home prices.
  
• Prices in western Alberta and Fort McMurray (located in northeastern Alberta) are down compared to 2023. Fort McMurray is susceptible to major floods and forest fires.

Average value of new mortgage loans in Alberta (2020–2023)

In 2020, the average size of new mortgage loans increased after the Bank of Canada lowered lending rates. The average loan amount rose from $275,343 in first three months of 2020 compared to $319,728 in the same period in 2022.

By March 2022, the Bank of Canada began raising rates again to combat inflation. Large-scale migration to Alberta coincided with this trend.

Measuring the impact of interest rate changes on borrowing in Alberta

In the first three months of 2023, the overnight rate reached 4.75%, and the average mortgage loan was $310,000. By July 2023, the third quarter of the year, the central bank raised the overnight rate to 5%. That summer in Alberta, the average mortgage loan decreased slightly (roughly 4% year-over-year), despite brisk demand for real estate.

Higher rates reduced the loan amounts people could qualify for, but this also led to higher monthly payments for borrowers, both new and renewing ones.

Housing market outlook for the remainder of 2024: affordability is slowly eroding

In June 2024, the BoC made its first rate cut in four years, reducing rates by a quarter of a percent (0.25%).

The rate cut is expected to further entice out-of-town homebuyers to purchase real estate in Alberta, which could drive prices higher Edmonton, Saskatoon, and Calgary especially.

Average monthly mortgage payment in Alberta (2022-2023)

The Bank of Canada kept interest rates low in 2020 to support the economy during pandemic shutdowns. This helped stoke the economy, and many people entered the housing market during the era of COVID lockdowns. But years of cheap borrowing led to historically high inflation.

Mortgage payments began to climb in 2022 after the Bank of Canada’s first hike (from 0.25% to 0.50%). That year, Canadians would see a total of seven rate hikes.

Housing demand and migration

Pent-up demand for housing helped drive up housing prices in 2022. Alberta also experienced significant migration (both international and interprovincial) that year, resulting in a population growth of over one million people—the highest in Canadian history.

Impact on borrowers

Low interest rates led people to borrow more, resulting in higher monthly mortgage payments.

However, mortgage holders renewing in 2022 faced higher rates, further increasing their monthly payments.

Inflation and payment trends

In 2022, the rate of inflation reached 8.1% in June, a 40-year high. By the end of 2022, the central bank raised rates to 4.25%, and continued to hike rates until it reached 5% in July 2023. This caused the average mortgage payment to increase. Here’s by how much it changed:

• Q3 2022: $1,800
• Q4 2022: $1,856
• Q1 2023: $1,907
• Q2 2023: $1,905
• Q3 2023: $1,977
• Q4 2023: $2,089

By the end of 2023, the average payment increased by a substantial $289 per month.

Alberta’s average payment is closest to the national average, making mortgages more affordable than B.C. and Ontario, but less so than in other prairie provinces and Quebec.

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How to get the lowest Alberta mortgage rates

There are a few things you can do to get the lowest possible mortgage rate.

• Compare mortgage rates - Always comparison shop before you lock into a mortgage term. Comparison websites make it easier than ever to shop around.
  
• Negotiate for a lower rate -It is possible to negotiate a lower rate with a lender, but it requires some research on your part. Using a rate comparison site can be helpful in this instance. Let the lender know you’ve seen lower rates elsewhere. If they’re unwilling to move on price, they may be able to offer other terms that offset the higher rate.
  
• Improve your credit score - Having a credit score of over 750 will help you qualify for a preferred rate. It will take time to improve your score if it’s below that benchmark. You can do this by paying off any existing debts and keeping your spending 30% or less than your total credit allowance going forward. Paying your credit card statements on time (and preferably in full) is also key. Also, do not close any credit card accounts; downgrade them to a low or no-fee option instead and use them a few times a year to ensure they remain active. In a joint mortgage, lenders consider the credit scores of both borrowers.
  
• Get an insured mortgage - High-ratio mortgages often qualify for low rates because they need to be insured by a mortgage insurance (like CMHC, Sagen, Canada Guaranty, among others). Lenders have a guarantee that they will recoup their loan if the borrower ever defaults, which removes risk from the contract. High-ratio mortgages are only available for home under $1 million in Canada. Down payments must be less than 20%, with the cut off being 5% down.
  
• Choose the right term - The most popular length for a mortgage term in Canada is five years. Five years is the sweet spot for many borrowers in terms of interest rate and principal. Shorter terms tend to have lower interest but high monthly payments. Longer terms (up to 10 years) also charge higher interest rates.
  
• Reduce your debts - A key interest metric that lender look at is your debt-service ratio. They refer to this to see if you would be able to afford your mortgage payments or if you’re at risk of defaulting. People who have enough income to service their mortgage and pay off any preexisting debts as well as other life expenses are seen as less of a risk.
  
• Secure a reliable source of income - Mortgage lenders look for applicants that have a strong record of employment. A history of job instability will hurt your chances of approval.
  
• Watch interest rates - For a decade, Canadians enjoyed a period of ultra-low interest rates. It’s unlikely rates will be that low again (barring a major global event) but it’s still important to pay attention to the Bank of Canada’s interest rate decisions. It will save you money on interest payments in the long run.