You'll be redirected in a few seconds. Please don't exit this window.
If you are not redirected within 30 seconds, please click here to continue.
If you are not redirected within 30 seconds, please click here to continue.
If you are not redirected within 30 seconds, please click here to continue.
If you are not redirected within 30 seconds, please click here to continue.
Rates are based on an average mortgage of $300,001
| Insured | 80% LTV | 65% LTV | Uninsured | Bank Rate | |
|---|---|---|---|---|---|
| 1-year fixed rate | 6.44% | 5.29% | 5.29% | 7.09% |
6.59%
|
| 2-year fixed rate | 5.54% | 5.59% | 5.59% | 5.84% |
6.19%
|
| 3-year fixed rate | 4.69% | 4.69% | 4.69% | 4.99% |
5.29%
|
| 4-year fixed rate | 4.74% | 4.84% | 4.84% | 4.89% |
5.19%
|
| 5-year fixed rate | 4.44% | 4.59% | 4.44% | 4.44% |
4.84%
|
| 7-year fixed rate | 4.89% | 5.29% | 5.29% | 5.89% |
5.90%
|
| 10-year fixed rate | 5.69% | 5.84% | 5.84% | 6.09% |
7.25%
|
| 3-year variable rate | 5.75% | 5.90% | 5.80% | 5.80% |
8.10%
|
| 5-year variable rate | 5.40% | 5.55% | 5.45% | 5.45% |
5.94%
|
| HELOC rate | N/A | N/A | N/A | N/A | N/A |
| Stress test | 5.25% | 5.25% | 5.25% | 5.25% | N/A |
Updated
The past year was a difficult one for Canadians who were seeking to obtain or renew a mortgage. By July 2023, the Bank of Canada had reached its peak interest rate of 5% after a series of increases that started in March 2022. This trend began because of inflationary pressures that began in early 2022 and grew to a high of 8.1%.
With interest rate hikes, that inflationary number has started to gradually decline to a level hovering around 2.7% in June after increasing in May this year. High shelter price inflation, driven by rising rent and mortgage interest costs, shows that people are spending a significant part of their budget on housing. According to the Bank’s monetary policy report, shelter services price inflation is around 7%, near its level in December 2023 and well above its historical average.
Bank of Canada expects core inflation to slow down to around 2.5% in the second half of 2024 and continue to decrease gradually throughout 2025. Looking at this downward trend in inflation, the Bank of Canada lowered its policy interest rate again year by a 25 basis points on July 24, to now stand at 4.50%. After a long gap of keeping the policy interest rate steady at 5%, the first cut in two years happened on June 5, 2024, with a 25 basis points cut. This makes borrowing cheaper and encourages spending and investment.
The end of the fourth quarter 2023 showed some of the difficulty with continued high interest rates for mortgage consumers. Post-renewal, monthly mortgage payments increased by $457 on average in the country, with even higher increases seen in Ontario and British Columbia with an average renewal increase payment of $680, according to the Equifax Canada’s Market Pulse Consumer Credit Trends and Insights report.
An RBC special housing report says that the downturn in the housing market may have run its course, due to a rebound in depressed markets. They say that interest rates will continue to influence the housing market and expect slow activity and soft pricing.
According to the quarterly Housing and Mortgage Market review for Q2 2024 by Mortgage Professionals Canada, the average five-year conventional mortgage rate peaked at 6.4% in Q4 2023 and they anticipate rates will gradually decline in the second half of 2024, reaching 5.4% by Q1 2027. Over 2 million mortgages are expected to renew in 2024-2025, many at much higher rates than those secured in 2020-2021 according to the CMHC.
With second rate cut this year on July 24, 2024, Bank of Canada CEO, Tiff Macklem says Canadians can expect further rate cuts if inflation continues to tail off. “If inflation continues to ease broadly in line with our forecast, it is reasonable to expect further cuts in our policy interest rate,” he said. “The timing will depend on how we see these opposing forces playing out. In other words, we will be taking our monetary policy decisions one at a time.”
For the housing market going forward, economists are now hoping for more rate cuts in the second half of the year, if inflation drops even lower. For its part, the Bank of Canada expects inflation to drop to the target rate of 2% by 2025.
In its latest update on July 24, 2024, the Bank of Canada also noted how global economy is expected to continue expanding at an annual rate of about 3% through 2026. The U.S. economy is slowing down as people are spending less, and inflation is decreasing as well. Europe’s economy is recovering after a weak 2023, while China’s economy is growing slowly with weak domestic demand but strong exports.
Canada’s economy grew by about 1.5% in the first half of 2024. However, the population is growing at about 3%, faster than the economy, which means there’s more supply than demand. There are more people looking for jobs than there are jobs available, and it’s taking longer for people to find work. Wages are increasing, but not as fast as expected. The unemployment rate has risen to 6.4%, with employment continuing to grow more slowly than the labour force and job seekers taking longer to find work. People are also spending less on things like housing and shopping for bigbox products.
All of this to say that volatility remains in many markets, not just housing, and continues to influence the Bank of Canada’s decisions. Consumers can expect more clarity, and rate drops, when inflation remains at a consistent 2.0% target rate, and other economic indicators stabilize.
Variable rate mortgage holders know too well that when rates increased their mortgage rates fluctuated to the upside. Another 25 basis points cut by the Bank of Canada on July 24th, making it 50 basis points cut so far this year, will give them some relief.
After a year-long hold on policy interest at 5%, the Bank of Canada finally cut 0.50% rate in two installments so far this year, to now stand at 4.50%. Interest rates in Canada had seen a steady rise since March 2022 when domestic and global inflation, and a tight job market, created the perfect storm for the Bank of Canada. This year marks the two-year anniversary of rate hikes.
In its statement about the future, the Bank of Canada noted that it if inflation continued to ease and reach the expected 2% mark in the coming months, it is only reasonable to expect further rate cuts. Economists anticipate that the policy interest rate will decline to 4.25% by the end of 2024, but we will have to wait and watch!
The bond market has priced in rising odds of rate cuts in 2024, with the bellwether 5-year — a major driver of fixed mortgage rate pricing — having fallen roughly 80 basis points, or 0.8%, from the October 2023 highs. That paved the way for a decline in fixed mortgage rates, which have fallen roughly 70 bps over that same time.
Bond yields have fallen to approximately 3.2% following the Bank of Canada's second rate reduction on July 24, 2024. This decline is driven by June's inflation rate decreasing to 2.7% from 2.9%, along with slowing growth and rising unemployment rate. Additionally, the weakening U.S. economy has contributed to easing pressures, paving the way for further rate cuts. Fixed rates have been unpredictable due to the turmoil in the bond market, which is common during periods of rate uncertainty.
The 5-year fixed rate has historically been the most popular term of choice for borrowers. However, people do not want to lock their mortgage at today’s high rates for too long and eventually miss lower rates two/three/four years from now. Many borrowers believe the mortgage rates will not remain high for too long and hope the rates will be lower in the coming years. The trend we see now is with a hope to sign for a shorter-term fixed rate for now, ride it out, and then renew into a lower rate when the term ends or matures. Fixed mortgage rate is by far the more popular choice among home purchasers, especially first-time homebuyers currently, mainly because of stability and fixed payments that do not fluctuate (unlike variable rate).
Variable rates made up about one-third of mortgages in Canada in 2021-2022. Because it is adjustable, the rate you pay on your mortgage can move up or down throughout the term. Banks will issue variable rates at prime plus or minus a discount (or premium). As prime rates increase, so does your mortgage.
Because rates have increased steadily over two years, people with variable rate mortgages have seen their very low rates increase to painfully high numbers. As this happens you start paying more interest and less towards principal. The opposite can be true as rates come down.
In March 2022, our internal data showed a 31% jump in requests for fixed rates versus the month before which was a decline of 37%. As rates have increased over the past two years so have those requests. In May of 2022 we saw another 68% increase in requests.
By December 2022 and January 2023, fixed rate requests grew by 70% and 114% respectively. Many believed rates would start to come down and so we started seeing internally that requests also came down for fixed rates. From July 2023 until February 2024, requests have been in the negative column except for a one-month exception in January.
Fixed rates, of course, remain unchanged. So, if you locked in a fixed-rate mortgage prior to the rate increases, they have stayed the same throughout the past two years. It’s a bit of a cushion until the term ends. Homebuyers looking at new mortgages within the past two years will have noticed significant increases in mortgage rates, as will people intending to renew. This has cooled the housing market both for buyers and sellers.
According to RBC, even as new home listings came to the market in April, many buyers remained on the sidelines across major Canadian markets. This led to slower sales amid the influx of supply bringing the inventory back to pre-2020 levels in the national housing market. Seasonally adjusted home sales activity declined 1.7% month-over-month between March and April at the national level, bringing housing activity down to the lowest point so far this year. A surge of buyers re-entered the market in April 2024 with new listings at 20-year lows.
Canada’s most populous province saw home sales activity go up by 10.1% from the same period a year ago.
There were 39,164 new residential listings in June 2024, higher than the 38,445 residential listings in April. Active residential listings were up 52.1% from the end of June 2023, a higher than any other June listings in more than five years. The average resale price for residential homes in Ontario was in June 2024 was $884,761, 2.3% below the June 2023 average.
As the population continues to grow and the economy seems headed for a soft landing (and not a recession), demand for housing will grow even if rates remain relatively high. Even though a 25 basis point doesn’t generate material change for homebuyers, it does bring in a positive trend that will give homebuyers greater confidence to enter the market. Lower rates mean affordability will improve and would eventually save up a significant amount for the borrowers.
Home sales activity in British Columbia was also much softer in June this year compared to the same time last year. In June 2024, B.C. reported a 19% decrease in residential unit sales at 7,082 units sold, compared to June 2023. While residential price this year was up 1% compared to last year, the total sales dollar volume was $7.1 billion, an 18% decline from the same period last year.
Alberta has recorded steady home sales across all property types, which has contributed to the year-over-year gain of 6.3% in May 2024. New listings also increased, but market conditions further tightened as inventory levels declined slightly and the sales-to-new listings ratio decreased. Total residential sales were up 6.3% year-over-year to 9,283 units while total residential average price went up 8% year-over-year to $507,706 and new listings were up 8.3% to 12,921.
Positive international immigration added to gains from interprovincial migration, resulting in a net increase of 45,375 people to Alberta’s population in the first quarter of 2024. This was an increase of 4.5% from the first quarter of 2023. International immigration added 32,893 people to Alberta’s population in the first quarter of 2024. This was an increase of 12.5% from the same period in 2023.
Two of the biggest cities of Alberta - Edmonton and Calgary - have reported positive home sales. While total residential unit sales in Greater Edmonton Area (GEA) were at 3,220 unit sales during May 2024, showing increases of 3.3% over April 2024, and 18.9% over May 2023. New residential listings amounted to 4,325, a number 13.4% higher than in April 2024, and 12.6% higher than May 2023. Overall inventory in the GEA increased 6.9% from April 2024 but is still 17.1% lower than May 2023.
In Calgary, home sales remained robust despite supply shortages in lower price ranges. In a market that continues to show resilience, May saw a total of 3,092 resale home sales. While this figure is nearly one per cent below last year’s record high, it is 34 per cent higher than long-term trends for the month. The pullback in sales was primarily driven by declines in lower-priced detached and semi-detached homes, where there was limited supply choice compared to last year.
These values are as of July 26, 2024:
Bank of Canada Overnight Target: 4.50%
Minimum Qualifying Rate: 5.25%
5-year bond yield: 3.27%
Prime Rate: 6.70%
5-year Fixed (Insured)*: 4.54%
5-year Fixed (Uninsured)*: 4.54%
5-year Variable (Insured)*: 5.65%
5-year Variable (Uninsured)*: 5.70%
* Lowest nationally available mortgage rates.
The economy continues its recovery. Here are the main indicators worth watching (as of July 26, 2024):
Total Consumer Price Index (Inflation): 2.7%
National Unemployment Rate: 6.4%
Real GDP by expenditure (Q1 2024): 0.4%
Oil (US WTI Crude): US$78.59
Canadian Crude Index: $60.14
The current Consumer Price Index (CPI) inflation rate has come down considerably from its peak of 8.1% in 2022. The inflation rate in Canada is at 2.7% on a year-over-year basis in June, down from 2.9% in March 2024. The Bank of Canada’s target rate for 2.0% inflation has not yet been reached yet.
The Bank of Canada reduced its policy interest rate for the first time in two years by 0.25% to 4.75% on June 5, following a second rate cut on July 24 of 25 basis points to 4.50%, anticipating further decline in inflation through the rest of the year. Monetary policy affects and trickles down to the housing market as banks set their lending rates based on the Bank of Canada’s lending rate.
Housing and real estate are interest-sensitive sectors, and as rates remain high, buyers and sellers tend to remain on the sidelines. However, with the rate cut, the Canadian Real Estate Association reported that market conditions tightened with home sales activity climbing 3.7% between May and June 2024. Even though the improvement wasn’t significant, Canada’s housing numbers perked up a bit on month-over-month basis in June.
But even if monetary policy can help fight inflation, higher rates also cut into affordability. The Bank of Canada says some of the effects causing housing prices to climb should have come down by now. But demand has outstripped supply for many years, in part, due to the rise in immigration. So, while the Bank of Canada can deal with inflation and affect the cost of housing in the short run, it cannot address long-term structural problems on the supply side, such as supply chain cost issues and higher population growth.
Just as the COVID-19 lockdown began in March 2020, the Bank of Canada’s key overnight lending rate stood at 0.25%. And because of those lockdowns and the economic turmoil they caused, rates remained low until about March 2022 when the first of many rate hikes occurred, initially adding 25 bps at the time.
Since 2022, the Bank of Canada has raised rates 10 times and it remained steady for almost a year starting July 2023 at 5.0%. On June 5, 2024, the Bank decided to reduce the rate by 25 bps, the first reduction in two years. A second rate cut this year came on July 24, with the bank cutting another 25 bps, making it a total of 50 bps reduction this year. For many looking to enter the housing market, the rate hikes have meant putting those dreams on hold, while others have seen their mortgage payments spike.
During 2022-2023, as rates increased, Canada's real GDP was trending lower. In Q1 2022, GDP stood at 1%, with a slight decline to 0.9% the following quarter. The higher cost of borrowing and slower demand has brought GDP to a 0.4% growth rate in the first quarter of 2024, which is up from the previous 0.2% position after recording three quarters of decline.
At the beginning of the pandemic, the spring of 2020 saw a robust demand in housing due to low rates and pent-up demand following the lockdowns. Since then, as rates increased, that demand has slowed. The slow economic growth and slower housing market are not unrelated. The Bank of Canada’s dampening effect, if you will, is working by reducing inflation. The housing market, on the other hand, is only now seeing a slight incline, which according to RBC, can only fully materialize after interest rates begin dropping significantly.
With the current Bank of Canada rate reduction of 25 bps, many feel that future rate cuts are more likely expected in the later part of 2024 or early into 2025. In fact, the Bank of Canada, when it announced its rate decision on June 5, 2024, said "more sustained evidence underlying inflation is easing, monetary policy no longer needs to be as restrictive. In other words, it is appropriate to lower our policy interest rate.
It is hard to get the same mortgage rate your friend might have gotten while shopping around for rates in Canada. Here are some of major factors which impact your mortgage rates:
Canadian 5-year bond yield trends are closely tied to how 5-year fixed mortgage rates will go. Lenders or other financial institutions who offer 5-year mortgage products are taking on risk when they lend out the money. The loans often come from depositors, but they also use government bonds to offset that risk. They will charge a risk premium or spread between the bond yield and the mortgage rate.
So, when 5-year bond yields rise, it’s likely that fixed-rate mortgages will also rise. During the pandemic, the Bank of Canada, through quantitative easing, purchased Government of Canada bonds in the secondary market.
These purchases increased prices on bonds but decreased the yields. Currently, the Bank is in a quantitative tightening mode and has not been purchasing bonds.
Five-year benchmark bond yields have been on a steady climb since the beginning of 2022 when they stood at 1.42% (Jan 5). The current 5-year benchmark bond yield is now at 3.3% (as of July 24, 2024). This is down from a peak of 3.89% on April 25, 2024.
Bond yields have been falling, in one area, because of bond supply. But also, the yields have a close link with inflation and the Bank of Canada benchmark rate. Bond markets are pricing in the fact that the Bank of Canada had held rates steady since July 2023 and after second rate cut on July 24 by another 25 bps will likely cut rates further later this year or into 2025. The drop in bond yields is reflecting that. That is a prediction of the bond market but, of course, there is no guarantee. And as bond yields fall, their correlation to 5-year fixed mortgage rates dictates a drop in those interest rates as well. It’s a wait-and-watch game.
Unless you have a crystal ball it’s difficult to predict what mortgage rates will be at the end of 2024. Most economists and observers expect the Bank of Canada to do more rate cut later this year. If that is the case, mortgage rates may come down further.
There is an expectation that the Bank of Canada will further cut rates after a second 25 bps reduction on July 24, which will lead to a full 1.0% cut by the end of the year. If this is the case, mortgage rates may start to trend lower and rest in the mid to high 3% range.
No one knows for sure, but it seems unlikely. The Bank of Canada agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by another 25 basis points on July 24, 2024. Recent data has increased the Bank's confidence that inflation will continue to move towards the 2% target by the end of the year. If the trend continues, the Bank of Canada will begin lowering rates further and mortgage rates will follow. Of course, it also depends on bond yields, but those have also been trending lower since February and are pricing in the possibility of future rate cuts.
Victor has 17 years of mortgage and real estate experience. He started his mortgage career in 2007 shortly after completing his undergraduate studies. After numerous awards and helping thousands of people with residential mortgage financing, he set his sights on the real estate industry as a second career to provide more value as a mortgage professional. One of his passions is helping people make informed decisions with education and guidance. His approach is personable, honest, and direct and he believes successful transactions result from working together as a team to achieve a common goal.
Stay on top of our latest offers, relevant news and tips!
