20 January 2024

Are Canadian Mortgage Rates Going Down?

The Canadian mortgage landscape is currently a rollercoaster of numbers and predictions. With the economy recovering from global events like the pandemic, the housing market has seen its fair share of ups and downs. Recently, homeowners and potential buyers have been on the edge of their seats, watching interest rates like hawks. From record-low rates that had buyers scrambling to lock in deals to recent upticks causing furrowed brows, the market has been anything but predictable. Government policies, economic shifts, and global events all play their part in this financial drama, making it a topic of hot discussion from kitchen tables to parliamentary floors.

Table of ContentAre Canadian Mortgage Rates Going Down?The Current State of Canadian Mortgage RatesHistorical Perspective on Mortgage Rates in CanadaLessons from HistoryPredicting the Future: Are Rates Going Down?Expert Opinions and PredictionsThe Role of Government and PolicyThe Impact on Homebuyers and HomeownersImpacts on HomebuyersImpacts on HomeownersConclusion

The Current State of Canadian Mortgage Rates

As of January 2024, the landscape of Canadian mortgage rates presents a fascinating picture. We’ve seen a slight fluctuation in rates, with the best 5-year fixed rates currently at 4.90% and 5-year variable rates at 6.00%. This range, though seemingly narrow, can have a substantial impact on monthly payments and overall loan costs.

To add a layer of clarity, let’s dive into some recent data:

  • Fixed Mortgage Rates: The 5-year fixed mortgage rates are hovering at around 4.90%, offering stability and predictability for homeowners.
  • Variable Mortgage Rates: More susceptible to market fluctuations, the 5-year variable rates currently stand at about 6.00%, reflecting the recent economic trends and Bank of Canada’s policy decisions.

The Canada 5-year Conventional Mortgage Lending Rate has shown a significant upward trend over the nine months from March to November 2023, culminating in a rate of 6.47% by November. Starting at just below 5.75% in March, the rates steadily climbed, crossing the 6.00% mark between July and August. This upward trajectory is delineated in the graph, with the highest rate recorded in November, indicating the peak of the trend line. The shaded portion beneath the curve on the graph provides a visual depiction of the increasing rates. It suggests a possible tightening of monetary policy or a reaction to rising inflationary pressures within the Canadian economy. 

This trend indicates escalating borrowing costs for homeowners with variable-rate mortgages and potential homebuyers, leading to higher monthly mortgage payments. This increase in mortgage rates has implications for the broader housing market, where heightened borrowing costs may dampen demand, slow down sales, and exert downward pressure on property prices as affordability becomes more strained.

Historical Perspective on Mortgage Rates in Canada

Delving into the history of mortgage rates in Canada reveals a landscape marked by volatility and surprise. Over the past several decades, homeowners have navigated a sea of changing rates, from the double-digit highs of the early 1980s to the historical lows post-2008 financial crisis. For instance, the tumultuous 1980s saw rates peak at an astonishing 21.46% in September 1981, which seems almost unfathomable today. This was followed by a gradual decline through the late 80s and 90s, providing a much-needed respite to Canadian borrowers.

Did you know?

The historical record for the 5-year fixed mortgage rate was set at its lowest in 2021 at 0.88%, while its peak was reached in 1981 at 21.75%.

The turn of the millennium brought a new era of falling rates, with the Bank of Canada’s key policy rate reaching a then-record low of average 5.04% in 2009 in response to the global financial crisis. Rates remained relatively low for years, fostering a boom in the housing market as borrowing became increasingly affordable. By the 2010s, the narrative of low-interest rates continued, with slight upticks as the economy recovered and cooled in its cyclical fashion.

Lessons from History

History is a great teacher, especially when understanding the patterns and trends in mortgage rates. One key lesson is the cyclical nature of the housing market and its correlation with mortgage rates. Economic booms often lead to rate hikes to cool off inflation, while recessions typically result in rate cuts to stimulate borrowing and spending.

Past market behaviours also show that external shocks — such as the oil crisis in the 70s, the tech bubble burst in the early 2000s, and the global financial crisis in 2008 — can dramatically affect mortgage rates. These events teach us that rates are not just about national economic health but also about global interconnectedness.

Predicting the Future: Are Rates Going Down?

As we stand at the crossroads of economic forecasts and market speculation, the future direction of Canadian mortgage rates is a subject of intense debate. Armed with charts and models, financial experts and economists provide educated guesses that offer a glimpse into the possible future of rate trends.

Expert Opinions and Predictions

In the short term, a consensus from major financial institutions suggests a holding pattern or a slight decrease in rates as the market adjusts to the global economic slowdown and domestic fiscal policies. These near-term forecasts are based on a myriad of variables, including inflation rates, employment figures, and geopolitical events.

Looking further ahead, long-term predictions become more complex. Some economists point toward historical cycles and current debt levels to argue for a gradual rate increase over the coming years. Analyzing the same data, others foresee a period of stability or even further decreases, particularly if the Canadian economy faces a downturn.

Amidst this sea of predictions, a few key themes emerge:

  • Most experts anticipate that rates will unlikely return to the historic lows seen in recent years.
  • There is a cautious optimism that rates will stabilize, with modest fluctuations rather than dramatic swings.
  • Economists closely monitor the housing market’s responsiveness to rate changes, significantly influencing future rate adjustments.

The Role of Government and Policy

The hand that steers the economic ship of Canada — government policy and central bank decisions — plays a pivotal role in the movement of mortgage rates. Fiscal policies, such as government spending and taxation, can stimulate or cool the economy, affecting inflation and, by extension, interest rates.

The Bank of Canada’s monetary policy, particularly its decisions regarding the policy interest rate, directly influences the cost of borrowing. When the central bank lowers the policy rate, it typically results in cheaper mortgages, encouraging borrowing and investment. Conversely, increasing the rate can slow down borrowing, cool off an overheating economy, and control inflation.

Government intervention in the housing market, such as the introduction of stress tests for borrowers and restrictions on foreign buyers, indirectly impacts mortgage rates by influencing demand. Furthermore, programs aimed at first-time homebuyers can shift the market dynamics, affecting the rates lenders are willing to offer.

In essence, government and central bank policies serve as the levers and dials of the economic machine, with each adjustment capable of fine-tuning or, at times, causing significant shifts in mortgage rates. As we look to the future, the actions and decisions made in the halls of power will undoubtedly continue to shape the path of mortgage rates, for better or worse.

The Impact on Homebuyers and Homeowners

Impacts on Homebuyers

  1. Affordability: Higher mortgage rates mean higher monthly payments, reducing the total loan amount a buyer can afford.
  2. Borrowing Power: As rates rise, the borrowing power of homebuyers decreases, sometimes narrowing their housing options to a smaller home or a less desirable location.
  3. Market Competition: In a high-rate environment, there may be less competition for homes, as some potential buyers are priced out of the market.
  4. Long-Term Planning: Buyers must plan for the possibility of rate increases throughout the life of their mortgage, affecting their long-term financial planning.

Impacts on Homeowners

  1. Refinancing Costs: Homeowners seeking to refinance may face higher interest rates than when they first secured their mortgage, potentially leading to higher costs over the life of the loan.
  2. Home Equity: Changes in mortgage rates can affect home prices, which impacts homeowners’ equity in their property. This can influence the decision to refinance and the terms they can negotiate.
  3. Renewal Rates: At renewal time, if rates have risen, homeowners may face a higher interest rate for their next term, directly increasing their monthly payments.
  4. Locked-in vs. Variable: Those with variable-rate mortgages will see their interest costs rise immediately with rate hikes, while those with fixed rates won’t feel the impact until they renew.


The question “Are Canadian mortgage rates going down?” takes us on a journey through the complex terrain of economic landscapes, historical precedents, and the corridors of fiscal policymaking. The analysis provided in this article reveals that while the immediate future may bring a stabilizing effect or a slight downtrend in rates, the long game is subject to a myriad of influences and remains a field of educated speculation.

Homebuyers and homeowners have faced the gusts of these changes, with each fluctuation dictating the affordability and accessibility of owning a home. It is clear that the current state of mortgage rates, influenced by the broader economic climate, government policy, and the central bank’s maneuvers, has a profound impact on the Canadian dream of homeownership.

While history has shown us that the mortgage rate environment is cyclical and subject to the ebb and flow of external and internal pressures, the resilience and adaptability of Canadians have allowed them to navigate these waters. As we look to the horizon, armed with insights from experts and lessons from the past, potential buyers and current homeowners must continue approaching their mortgage decisions with caution, education, and a view toward the future.

Whether the rates will decrease remains to be seen, but one thing is certain: vigilance and informed decision-making remain the best tools for those looking to enter or adjust to the Canadian housing market. The winds of change are ever-present, yet with a steadfast hand on the wheel and an eye on the compass of expert analysis, Canadians can chart a course to successful homeownership, irrespective of the whims of mortgage rates.


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