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Mortgage Rates Canada — The Inside Story

Canadian mortgage rates are at an all time low, the interest rates on bonds have the biggest affect on what we as Canadians pay for a mortgage. When the bond markets are low, as they are now, Canadians benefit by receiving the discounted mortgage rates from lenders.

In Canada you will see two different sets of numbers for mortgage rates, the bank has what is a called a posted mortgage rate that is the full amount they would like to get. As a mortgage broker I deal in discounted mortgage rates, by comparison today’s posted 5 year fixed mortgage rate is 4.79% where we research and find the best rates for you the consumer. The discounted rate can be almost all the way down to 2% below what the bank would offer you as their posted rate so today in some cases we would be able to get you a mortgage rate in Canada of 2.79%.

Canada’s mortgage rates have had a roller coaster ride over the last 40 years; if we look back to 1980 we would see rates as high as 21.75% for a 5 yr fixed rate. By comparison Canadian mortgage rates today have come all the way back down to 4.79%, even in the first 14 yrs of this century we have been as high as 9.26% for the posted rates. When people today complain about Canadian mortgage rates being high I usually show them the rate chart that shows them they are the lowest in the last 40 years.

The biggest fear for Canadian mortgage rates is that all the people who are now qualifying at a 3% mortgage will be hard hit when mortgage rates return to the normal number of 6 or 7%. Some of the biggest factors affecting Canadian Mortgage rates today are things happening outside of Canada. Markets in Europe are on a very slow recovery and this is causing them to be in near deflation states. When deflation happens then money is usually moved out of savings because banks are paying nothing on your money. That money quite often heads for safe havens like Canada and is invested in our bonds. The more money buying Bonds reduces the amount of interest they have to pay and then the lower bond rates help keep Canadian Mortgage rates lower.

Over all Canadian mortgage rates have been trending down since mid 2010 and are at the lowest spot now, CMHC has set in place new guidelines that have changed some of the mortgage landscape and reduced the number of people who can qualify for a Canadian Mortgage. These rules will hopefully help those who are looking to buy now and not put them in a difficult situation should mortgage rates rise again in the future.

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