Canadian Mortgage Rates.

Canadian mortgage rates have been trending upward in recent years due to a variety of factors, including inflationary pressures and the Bank of Canada's monetary policy adjustments. Here’s an overview of the key trends:

1. Rising Interest Rates

• The Bank of Canada has been raising its benchmark interest rate to combat high inflation, which directly influences mortgage rates. In 2023, the central bank raised its policy rate several times, and this has caused mortgage rates to increase across the board.

• Fixed-rate mortgages have become notably more expensive, with many homeowners renewing their mortgages at much higher rates compared to their previous terms.

2. Fixed vs. Variable Rates

• Fixed-rate mortgages have seen significant increases due to rising bond yields, which are closely tied to government borrowing costs and investor expectations about inflation.

• Variable-rate mortgages are tied more directly to the Bank of Canada's overnight rate. They saw steady increases throughout 2022-2023 as the central bank raised its rates. Some borrowers with variable-rate mortgages have experienced significant payment hikes.

3. High Demand in Certain Markets

• While higher mortgage rates typically cool housing demand, markets in Toronto, Vancouver, and other major Canadian cities have remained active, contributing to some localized pressure on rates due to demand.

4. Economic Uncertainty

• The rates could continue to fluctuate depending on global economic conditions, including the risk of recession or inflationary trends. This has made predicting long-term mortgage rate trends difficult.

5. Affordability Challenges

• Higher rates have led to growing concerns about housing affordability, especially for first-time homebuyers. Monthly payments on new mortgages have significantly increased, and qualifying for a mortgage has become tougher due to higher stress test benchmarks.

If the Bank of Canada continues to increase rates to curb inflation, mortgage rates will likely stay elevated in the near term. However, some economists expect rates to eventually stabilize or decrease once inflation is brought under control. Keep an eye on policy announcements from the central bank for the most immediate impact.