Mortgage rates in Canada have seen significant changes in 2024, largely due to the Bank of Canada’s (BoC) monetary policy. If you’re considering buying a home or refinancing your mortgage, understanding these rate fluctuations is key to making informed financial decisions. Recent rate cuts by the BoC are reshaping both fixed and variable mortgage options, impacting the affordability of homeownership across the country.
In 2024, Canada’s mortgage market has been influenced by the BoC’s decision to reduce its overnight rate. This reduction, from 5.0% in June to 3.75% by October, has led to lower borrowing costs, especially for those looking to purchase or refinance homes.
Current Mortgage Rates in Canada (2024)
- Bank of Canada Overnight Rate: Reduced to 3.75% in October 2024, from 5.0% in June.
- 5-Year Fixed Rates: Range from 4.64% to 4.89%, depending on the lender.
- 5-Year Variable Rates: Best rates start at 4.85%, based on the prime rate.
How Bank of Canada’s Rate Cuts are Shaping Mortgage Rates
Mortgage rates in Canada directly impact home affordability and the broader economy. When the Bank of Canada adjusts its interest rates, it influences borrowing costs across the country. In 2024, the BoC aimed to stimulate economic growth and keep inflation under control by lowering rates, which directly affected mortgage pricing.
1. Fixed-Rate Mortgages: Stability at a Price
For many Canadians, fixed-rate mortgages offer predictability and peace of mind. These mortgages come with an interest rate that remains the same for the entire term, typically five years. This option is particularly appealing to homeowners who prefer a steady monthly payment, unaffected by market fluctuations.
As of late 2024, five-year fixed mortgage rates range between 4.64% and 4.89%, depending on the lender. Despite recent rate cuts, fixed-rate mortgages are still generally more expensive than variable rates, as they are tied to bond market yields.
- Example:
- Bank A offers a 5-year fixed-rate mortgage at 4.74%.
- Bank B offers a 5-year fixed-rate at 4.64%, though it may come with different terms that influence your overall choice.
If you seek stability and want to avoid surprises, opting for a fixed-rate mortgage might be your best bet.
2. Variable-Rate Mortgages: Flexibility vs. Uncertainty
Variable-rate mortgages (VRMs) are tied to the prime rate, which fluctuates with the BoC’s overnight rate. In 2024, the prime rate dropped to 5.95%, allowing some of the best variable-rate mortgage deals to fall to 4.85%. These types of mortgages can offer lower initial payments, particularly if interest rates continue to decrease.
- Example:
- Bank X offers a 5-year variable-rate mortgage at 4.85%.
- If rates continue to drop, monthly payments could decrease further, though rising rates would cause payments to increase.
If you’re comfortable with the possibility of your payments fluctuating, and you believe interest rates will remain low or fall further, a variable-rate mortgage might suit your financial situation.
3. Broader Economic Impacts of BoC Rate Cuts
The Bank of Canada’s rate cuts are intended to support the economy by stimulating borrowing and consumer spending. In 2024, this has translated into more affordable borrowing, which can have significant impacts on the housing market and the overall economy.