“Explore the latest Mortgage Rate Trends in Canada. Discover insights on rate changes, market shifts, and potential savings for homeowners.”
In the financial world, there’s a buzz about central banks possibly reducing interest rates next year. This has led to some fixed mortgage rates hitting their lowest points in months. However, amidst economic uncertainty, folks aiming to buy their first home or renew their mortgages are facing tough decisions.
In Canada, mortgage rates shot up at the beginning of 2022 due to the Bank of Canada raising interest rates. But now, for the first time since May, some lenders are offering insured five-year fixed mortgages with interest rates below five per cent.
Why the drop? It’s tied to lower bond yields, a reaction to the U.S. Federal Reserve’s recent announcement of three expected rate cuts in 2024. This news might influence rate cuts for other global banks, including the Bank of Canada.
Frank Napolitano, a mortgage broker in Ottawa, thinks the employment rate will rise in 2024, and with inflation dropping to 3.1 per cent, the bond market sees a future with lower interest rates.
Napolitano is optimistic, saying, “First-time homebuyers have been waiting, and this reduction in interest rates is what they needed.”
High mortgage rates have been a struggle for homeowners, creating obstacles for potential buyers. David Speakman from Ottawa has been waiting two years to buy a home. Despite fixed mortgage rates going down, he’s still considering a variable rate, expecting more rate cuts. He believes variable rates will drop faster than fixed rates, potentially saving him money over the long term.
While many experts predict rate drops, they advise caution, saying we shouldn’t expect rates to go as low as during the pandemic.
Victor Tran, a mortgage expert, suggests Canadians keep saving. He warns that even with a quarter, half, or full percent rate drop, it might still be unaffordable for many.
Around 60 per cent of Canadian mortgages will be up for renewal in the next three years. This puts millions of homeowners at risk of higher payments when their fixed-rate mortgages renew.
Andy Hill, a mortgage broker in Vancouver, shares, “A drop to four per cent may not be a huge relief for someone with a 2.5 per cent fixed rate. While better than six, it might not help much, leading to a renewal shock no matter how much rates change.”
Even though there’s a belief that interest rates will go down, the Bank of Canada insists on waiting for more data to confirm a downward trend in inflation. Meanwhile, a report from Scotiabank suggests that Canada’s inflation data leans more towards a possible rate hike than a rate cut.
Andy Hill warns, “People celebrating now might be premature. If inflation comes back, rates might stay high for a while, posing a significant risk today.”