The Best Current Mortgage Rates in Toronto

Toronto housing market trends (2023-2024)

Sales in 2023 and 2024 are a slight improvement over 2022, when the Bank of Canada began the rate hikes. Since rates have come down and inventory has increased, sales in the early part of 2024 were more robust but declined somewhat into the summer and fall months.

As a result, new listings were higher in 2024, approaching 2021 levels, as indicated by the latest report from TREB. Sellers have re-entered the market in the hopes that lower interest rates will entice buyers back into a buying mood. Unfortunately for those same sellers, sales remain relatively slow, which is why the ‘sales-to-new-listings’ ratio is low. This, in turn, is driving down prices for homes (high supply but less demand).

Resale homes, on the other hand, have fared better and have remained steady in 2024 when compared with previous years between 2021 and 2023.

Condo market

The condo market took a hit in 2024, according to the latest TREB condo market report. With a more than 83% increase in active listings in Q2 2024 versus Q2 2023, many owners may be trying to get rid of an investment that they could no longer afford.

Condo apartment sales amounted to 5,474 in Q2 2024, which is a drop of nearly 20% compared to 6,824 sales in Q2 2023.

But condo owners are holding firm on price as prices only decreased by 1.2%. The average selling price was $729,005 in Q2 2024 compared with $737,925 in Q2 2023.

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^{Source: CREA}

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Average new mortgage loan value in Toronto (2020-2024)

Since the pandemic in 2020, Toronto’s average mortgage loan value has seesawed as interest rates have tracked. Starting in Q1 2020, the average new mortgage loan value in Toronto was $396,937, according to Canada Mortgage and Housing Corporation (CMHC). As rates remained low to help fuel the economy during the pandemic, home prices and average new mortgage loan values in Toronto increased culminating in a peak of $567,448 in Q3 2022. This coincides with the Bank of Canada’s decision to raise interest rates to stave off a rise in inflation that year (starting in March 2022).

This had the effect of reducing housing interest and limiting the number of people looking for loans. People were no longer able to quantify for the same amount of loans, and housing prices came down significantly.

As rates in Toronto have been slowly decreasing starting in 2024, loan values have slightly increased. They reached a low of $480,272 in Q2 of 2023. As of Q2 2024, the loan value has reached $506,593, as rates have started to come down. For comparison, on the national level, the new mortgage loan value sits at $332,825, while on the provincial level, it is at $427,078 (as of Q2 2024), putting Toronto’s average well above the rest of the country (aside from Vancouver, which has the average new mortgage loan value of $515,747 as of Q2 2024).

^{Source: CMHC}

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Average mortgage monthly payments in Toronto (2020-2024)

According to CMHC, average monthly payments for Toronto since Q1 2020 have mostly been on an incline. In Q1 2020, monthly payments came in at $1,944. That number gradually rose throughout the rest of 2020, 2021 (with a few dips), 2022 and 2023, even as rates went up starting in 2022.

This may be due to the simple mathematics of higher rates leading to higher monthly payments, especially as mortgages came due and people were forced to renew at higher rates.

Monthly mortgage payments peaked in Q4 2023 at $3,366. The decrease in monthly payments in Q1 2024 and from Q1 to Q2 2024 was due to the dramatic decline in government bond yields and fixed rates from the peaks seen in Q3 and Q4 of 2023. As a result of lower interest rates (and slightly lower new mortgage loan values), those who get a loan in 2024 will pay less monthly than those who got one in 2023.

As of Q2 2024, Toronto monthly mortgage payments are at $3,121.

^{Source: CMHC}

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How to get the lowest Toronto mortgage rates

If you’re looking to secure a lower mortgage rate, here a few things you can do:

• Compare mortgage rates. Comparison shopping with sites like RATESDOTCA can help you find the cheapest mortgage rates in minutes. And for free.
• 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 in Canada are only available for homes costing less than $1 million. 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 lenders look at is your debt service coverage 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 pre-existing 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.

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Toronto mortgage rate forecast

The pain of interest rate increases by the Bank of Canada to curb inflation appears to be working. Inflation has gone below the 2% mark, now sitting at 1.6%.

The Bank of Canada started cutting rates earlier in 2024 as inflation began to abate and is expected to continue on this path. As of October 2024, the overnight rate sits at 3.75% – a reduction of 50 basis points (bps) from the preceding month. The overnight rate started out at 5.00% in 2024, meaning that the overall reduction has been 125 bps.

As rates come down, and inflation continues its decline, homebuyers can expect lenders to reduce rates and offer competitive mortgages. It might lead to a buyer’s market but also, sellers could flood the market with inventory hoping buyers are in a spending mood (which might raise prices).

Many economists feel the Bank of Canada will further cut rates this year and possibly into 2025.

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