Mortgage Report

The Best Mortgage Rates

Compare best mortgage rates from the different types shown below.

Insured 80% LTV 65% LTV Uninsured Summary

September 2020 Summary

Rates remain near their all-time lows as the Bank of Canada maintains emergency rate stimulus. The Bank has repeatedly confirmed that Canada’s trendsetting overnight rate is at its “effective lower bound” That implies there’s no room for prime rate to dip further, tilting the risk-reward away from variable rates and more towards fixed rates.

The BoC’s own forecasts as well as the economist consensus now project no rate increases for at least two years (mid-2022 at the earliest). Keep an eye on the 5-year bond yield, however, as a move above 0.60% might indicate a change in rate trend from sideways to up.

Value zone

Rates with exceptional value this month include:

The 5-year fixed

  • Reason: 5-year rates are priced just a hair above variables and offer far more protection if rising inflation expectations and/or credit risk concerns lead investors to sell bonds, thereby driving up interest rates. A fixed-5 eliminates all renewal risk until 2025. The best 5-year terms have fair penalties and can be extended with no penalty—helpful if the borrower later decides to lock in even longer.

The 1-year fixed

  • Reason: At prime – 0.65% on average, variable-rate discounts are still sub-par, historically speaking. A better alternative for well qualified risk tolerant borrowers with above average mortgage amounts is the 1-year fixed. You can find them as low as 1.37% for insured and mortgages with 35%+ equity and a home value under $1 million.

Key rates

Most benchmark rates were little changed last month, save for a 15 bp drop in the minimum qualifying rate (a.k.a. “Stress test rate”). These values are as of Sept. 1, 2020:

  • Bank of Canada Overnight Target: 0.25%
  • Minimum Qualifying Rate: 4.79%
  • 5-year bond yield: 0.36%
  • Prime Rate: 3.95%
  • 5-year Fixed (Insured)*: 1.76%
  • 5-year Fixed (Uninsured)*: 1.96%
  • 5-year Variable (Insured)*: 1.69% (prime – 0.76)
  • 5-year Variable (Uninsured)*: 1.80% (prime – 0.65)

Key economic numbers

The economy remains fragile to say the least. Here are the main indicators worth watching:

  • Average Core Inflation: 1.63%
  • National Unemployment Rate: 10.20%
  • Real GDP (Q2): -38.7% annualized
  • Oil (WTI Spot): $42.76
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