The Best Current Mortgage Rates in Toronto

Toronto mortgage rate market characteristics in 2024 

Toronto, Canada’s largest, and North America’s fourth-largest city, is home to a diverse population that attracts immigrants and cultures from all over the world. With about three million in its core and six million in the Greater Toronto Area, people living here can find work and homes in a variety of sectors, areas and price points.

Because of its size and diverse workforce, Toronto is also home to Canada’s largest banks and financial lenders, also known as The Big Five, which include:

• Bank of Montreal (BMO)
• Canadian Imperial Bank of Commerce (CIBC)
• Royal Bank of Canada
• Scotiabank
• Toronto-Dominion (TD) Bank

Other mortgage and lending institutions include:

• Alterna Credit Union
• DUCA Financial Services Credit Union
• National Bank
• Meridian Credit Union
• Tangerine
• True North Mortgage

Home sales and price trends in Toronto

Even with a lower-than-expected inflation rate, and as a result, lower interest rates from the Bank of Canada, the housing market in Canada, and Toronto specifically, remains slow. The Canadian Real Estate Association (CREA) has downgraded its housing market forecast for the rest of the year and said interest rate cuts have not improved the market. CREA says things will remain in a ‘holding pattern until next spring.’

Also, although sales volumes have edged higher, a larger percentage of homes is sitting on the market for longer than in 2023.

Housing prices started to fall since about the second quarter of 2022 when the Bank of Canada raised interest rates. However, those prices have stabilized in the second half of 2023 and 2024 as inflation and rates have come down. This could lead to greater inventory in the market but also demand as rates are expected to fall further into 2025.

Buying a home in Toronto as a newcomer

Toronto is the number one city for newcomers to Canada. As a result, the demand for special programs is higher than other parts of the country. That is why for people just moving to Canada, including students who may be here temporarily, many lenders offer programs to meet their needs. To get a mortgage you will have to prove to lenders you have:

• A stable income
• Decent credit
• A down payment

Many other aspects of your financial status may affect your ability to get a loan. For example, how large a down payment are you making? Can you get a reference from your home bank? Are you a permanent resident or non-permanent resident?

These are the issues you will need to discuss with your lender.

Home-buying incentives

The Government of Canada also offers various programs to assist homebuyers with their purchases, such as:

• The First-Time Home Savings Account (FHSA). Allows new homebuyers in Canada to save up to $40,000 tax-free when buying a home with an annual contribution of $8,000.
• GST/HST new housing rebate. Provides a rebate for some of the tax you pay when purchasing a home.
• Home buyers’ amount. Offers a non-refundable income tax credit on a qualifying loan.
• Home Buyers’ Plan (HBP). Allows you to withdraw up to $35,000 in a calendar year from your RRSP to buy of build a qualifying home for yourself or a relative with a disability.

Average house prices in Toronto (2023-2024)

There has been a considerable rise and then fall in housing prices when you compare pandemic era pricing with more recent numbers. In Q4 2021, housing prices rose 3% to 4% month-over-month and about 30% year over year across all sectors, according to CREA.

Looking at all three sectors of single-family benchmark homes, and one- and two-storey townhomes, we can see a similar trend. As interest rates began climbing, prices for homes began to drop until about Q1 2023.

CREA’s composite benchmark shows that home prices in the pandemic, around September 2021, were at $1,067,200, and as of July 2024, stand at $1,089,800 – a percentage increase of only 2.12%. Even as rates are being cut, we still don’t see any dramatic increase in prices or sales. In fact, there have been significant drops throughout the first half of 2024, month over month and year over year. If you compare the July 2024 composite benchmark of $1,067,200 to the July 2023 composite benchmark of $1,152,600, for instance, you’ll notice that the average price has dropped by 5.45% year over year. This is the case across all sectors. So, while home prices are no longer in freefall as of Q1 2023, home prices in 2024 remain largely flat month-to-month.

It may seem that more has been coming onto the market since summer 2024, and yes, rates are coming down, but buyers are still faced with high costs of living and relatively high interest rates, with many people still waiting on the sidelines. Another rate cut or two and greater supply might change all of that.

Many in the industry see a 4% mortgage rate as an ’inflection point’ when buyers would begin coming back into the market, which should be happening soon. And since the Government of Canada bond yield is below 3%, rates are trending downward to under 5%, as of October 2024.

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.