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Canadian Mortgage Rate Forecast 2024

Learn about trends and factors that impact your mortgage rates.

Compare mortgage rates from lenders across Canada

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The Best Current Mortgage Rates in Canada

Evaluate Canada’s best mortgage rates in one place. RATESDOTCA’s Rate Matrix lets you compare pricing for all key mortgage types and terms.

Rates are based on an average mortgage of $300,001

Insured 80% LTV 65% LTV Uninsured Bank Rate
1-year fixed rate 4.99% 5.60% 5.60% 6.69%
7.09%
2-year fixed rate 5.67% 5.30% 5.30% 6.04%
6.39%
3-year fixed rate 4.79% 4.94% 4.94% 4.94%
5.64%
4-year fixed rate 4.94% 4.94% 4.94% 5.09%
5.49%
5-year fixed rate 4.74% 4.79% 4.79% 4.94%
5.04%
7-year fixed rate 4.94% 5.29% 5.29% 5.09%
5.90%
10-year fixed rate 5.74% 5.84% 5.84% 5.84%
7.25%
3-year variable rate 6.10% 6.70% 6.70% N/A
8.60%
5-year variable rate 5.90% 6.10% 6.10% 6.25%
6.59%
HELOC rate 7.20% 7.20% 7.20% 7.20% N/A
Stress test 6.74% 6.79% 6.79% 5.25% N/A
Today's Headline
What does the federal budget for 2024 have to say about housing?
2024 federal budget key takeaways: Goals to boost housing supply and affordability by freeing up land, incentivizing builders, and reducing mortgage payments.
Apr.18.24
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Written By Victor Tran

Mortgage Broker and Realtor
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Reviewed By Shivani Kaul
Content Manager - Mortgages

Updated

Canadian Mortgage Rate Forecast for 2024

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 5.0% after a series of increases that started in March 2022. This trend began because of inflationary pressures that started in early 2022 and grew to a high of 8.1%.

With interest rate hikes, that inflationary number has come down to a level hovering around 3%, however, the Bank of Canada has maintained its overnight lending rate at 5%, even as recently as March 6, 2024.

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.

A report from the Mortgage Professionals Association says that home sales nationally were down 6.2% in the fourth quarter of last year, with BC and Quebec having the sharpest declines of 14.8% and 6.9% respectively. Still, sales ended the year with an 8.7% monthly jump in December.

So, are those interest rate cuts coming any time soon? Bank of Canada CEO, Tiff Macklem’s latest statement on inflation notes that while interest rate hikes have helped with inflation, “... future progress on inflation is expected to be gradual and uneven, and upside risks to inflation remain.” One of the reasons interest rates have remained unchanged.

For the housing market going forward, economists are now hoping for a summer rate cut, or sometime 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 2.0% by 2025.

In its latest update, the Bank of Canada also noted how global, and US GDP slowed in Q4 2023, and that bond yields have increased since January, as have oil prices. Canada’s GDP grew by 1.0% after having fallen 0.5% in the third quarter. CPI inflation fell back to 2.9% but “shelter” price inflation remains high.

The Bank of Canada has also expressed concern that a reduction in interest rates could spur a resurging housing market even further, as buyers have been waiting for some relief. Some economists believe that the Bank may be reluctant to cut rates again in the spring. Tiff Macklem, CEO of the Bank of Canada has said, “...we need to balance the risks of keeping monetary policy this restrictive too long against the risks of lowering prematurely and jeopardizing the progress we’ve made.”

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. A cut by the Bank of Canada’s rates will directly reduce their mortgage rates, as opposed to fixed rates which are locked in until the term is done.

Key rates

These values are as of March 19, 2024:

  • Bank of Canada Overnight Target: 5%
  • Minimum Qualifying Rate: 5.25%
  • 5-year bond yield: 3.47%
  • Prime Rate: 7.2%
  • 5-year Fixed (Insured)*: 4.74%
  • 5-year Fixed (Uninsured)*: 4.94%
  • 5-year Variable (Insured)*: 5.90%
  • 5-year Variable (Uninsured)*: 6.25%

* Lowest nationally available mortgage rates.

Key economic numbers

The economy continues its recovery. Here are the main indicators worth watching (as of March 19, 2024):

  • Total Consumer Price Index (Inflation): 2.8%
  • National Unemployment Rate: 5.8%
  • Real GDP by expenditure (Q4 2023): 0.2%
  • Oil (WTI Spot): $77.36

How does the rate of inflation affect future Bank of Canada interest rate changes?

The current Consumer Price Index (CPI) inflation rate has come down considerably from its peak of 8.1% in 2022. The rate now stands at 2.9% as of January 2024. The Bank of Canada’s target rate of 2.0% has not yet been reached and will not likely be reached, at least for the first half of this year.

That is really the main reason the Bank of Canada has left its key lending rate at 5.0% and is likely to do so for some time. 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. That does two things: it shrinks supplies and demand dries up. In fact, annual home sales declined 11% compared to 2022, according to the Canadian Real Estate Association.

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.

Key takeaways:

  • Current CPI of 2.9% remains higher than the Bank of Canada target rate of 2.0%
  • The Bank of Canada’s monetary policy of holding interest rates at 5.0% have curbed housing demand.
  • Population growth in Canada has significantly influenced housing demand.
  • Bank of Canada can influence short term demand on housing but cannot influence longer term structural problems.

Future interest rate predictions for Canada

Just as the lockdowns of COVID-19 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 basis points at the time.

Since 2022, the Bank of Canada has raised rates 10 times to its current rate of 5.0%. 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 that time, as rates have increased, Gross Domestic Product in Canada has been trending lower. In Q1 of 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 0.2% growth rate in the Q4 of 2023, which is up from the negative position seen in the previous quarter.

What about the housing market?

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 hold on rates, many feel that future rate cuts are more likely into the later part of 2024 or early into 2025. In fact, the Bank of Canada, when it announced its rate decision on March 6, 2024, said it is “still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation.”

Key takeaways:

  • Since 2022, the Bank of Canada has raised interest rates 10 times.
  • The current rate was held at 5.0% and may not come down until late 2024 or 2025.
  • GDP growth rate grew by 0.2% in Q4 2023, a slight increase from a negative position in the previous quarter.
  • The housing market will show greater signs of life once rates start to come down significantly.
Interest rates posted by major chartered banks in Canada

Mortgage rate determinants in Canada

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:

  1. The economy – When economic indicators such as GDP are strong, and/or the economy begins heating up, interest rates tend to rise. When there are economic downturns, rates generally come down to stimulate spending.
  2. Inflation – In a class by itself, inflation has a very important role to play in determining interest rates. As is the case right now, the Bank of Canada has spent the last two years fighting inflationary pressure by raising interest rates. The hope is that this will slow the economy and bring pricing to a more stable level.
  3. The bond market – Mortgage rates are affected by the government bond market. Financial institutions will use the 5-year government bond as a benchmark to set their mortgage rates. When yields increase lenders often raise rates to maintain profitability, and when bond yields fall, they tend to lower rates.
  4. Your individual credit history – Mortgage lenders look at individual circumstances when setting mortgage rates. A person with a higher credit score, and an acceptable debt-to-income ratio, is considered a lower risk and can likely secure a lower mortgage rate than someone who is not in those categories.
  5. Down payment – The greater the down payment, the lower the risk you are considered. Like the logic behind using one’s credit score, lenders look favourably on borrowers who can demonstrate their ability and commitment to paying down their mortgage. A large down payment shows that commitment in the eyes of the financial institution.
  6. Individual loan type – Term and length of your mortgage can affect the rate you receive. Generally, rates are typically lower for longer terms, simply because lenders want the business for longer.
  7. Competition – Banks and lenders are in business to make money. That’s where competition comes in as each lender is vying for your business by undercutting mortgage rates. Talking to different institutions and comparison shopping can yield very different rate options.
  8. Type of property – Rates are typically higher for investment/rental properties vs. a principal residence. The “rate premium” is 0.05% to 0.10%.
  9. Amortization – If your amortization is greater than 25 years, lenders will charge a premium of at least 0.10% higher.
  10. Closing Date – The mortgage rate can be slightly lower if the closing date is sooner (for instance, 30-day closing vs. 120-day closing). This is tied to the cost of hedging rates.
  11. Insured vs. Insurable vs. Uninsured – The lowest rates in the market are Insured mortgages. Rates are higher for insurable and uninsured mortgage rates. In order to understand this better let us define the three rates.
  • Insured mortgages are loans that have mortgage insurance provided by CMHC, Sagen, or the Canada Guaranty. It is applicable when a borrower has a down-payment of less than 20% of the purchase price, where in the maximum purchase price is $999,999.99 with amortization of 25 years. Mortgage insurance protects the lender in case the borrower defaults on the loan. The cost of mortgage insurance is passed on to the borrower in the form of premiums which are added to the mortgage payments. Insured mortgages pose lower risk to lenders as the insurance provides a financial guarantee against default, hence lower mortgage rates.
  • Insurable mortgages are loans that meet the criteria for mortgage insurance but may not necessarily have mortgage insurance. Borrowers with a down payment of at least 20% but less than 35% are eligible for mortgage insurance. The purchase price is less than $1,000,000 in this case and maximum amortization of 25 years. The lender pays the insurance premiums to protect their risk and the premium is not paid by the borrower. As a result, the cost of the premiums are passed to the borrower in the form of a higher mortgage rate. Even though these mortgages are not insured, they are considered lower risk compared to uninsured mortgages because they meet the standards required for mortgage insurance
  • Uninsured mortgages are loans where the borrower provides a down payment of at least 20% of the home's purchase price and thus are not required to have mortgage insurance. The purchase price of the house can be any amount but the downpayment has to be a minimum of 20% and amortization is greater than 25 years. These mortgages carry higher risk for lenders because there is no insurance protection against borrower default, hence higher mortgage rates.

Canadian Bond Yields Predictions (5 yrs.)

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). As inflation started to become a problem, the Bank of Canada began raising interest rates up to 5.0% where they stand today. The current 5-year benchmark bond yield is now at 3.43%. This is down from a peak of 3.69% on February 14, 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 has been holding steady on rates and will likely cut rates 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-see game.

Key takeaways:

  • Five-year fixed mortgage rates are connected to the 5-year benchmark bond yields trends.
  • The Bank of Canada is currently in a quantitative tightening mode and not purchasing bonds.
  • The 5-year benchmark bond yield has been dropping since February 14, 2024.
  • The bond market is pricing in the possibility of further rate cuts by the Bank of Canada.

Frequently asked questions about the changing mortgage market in Canada

What will mortgage rates look like by the end of 2024?

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 start cutting rates later this year. If that is the case, mortgage rates may come down further.

What will mortgage rates look like by 2025?

There is an expectation that the Bank of Canada will cut rates by 0.25 basis points starting in April, 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.

Will mortgages in Canada continue to increase in 2024?

No one knows for sure, but it seems unlikely. The Bank of Canada has held rates steady at 5.0% in its latest March 6, 2024, announcement. Inflation has dropped to 2.9% and has been trending lower since its peak of 8.1% in 2022. If the trend continues, the Bank of Canada will begin lowering rates 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 Tran ,
Mortgage Broker and Realtor

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.

Experience
  • Mortgage
  • Real Estate
Education
  • Toronto Metropolitan University
  • Real Estate Salesperson - Real Estate Council of Ontario
  • Mortgage Agent - FSRA
Featured in
  • Toronto Star, The Globe and Mail, CTV, Global News, Yahoo News, among others.

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