Getting a mortgage is a major financial commitment and can make big changes to your lifestyle. So, taking the time to choose the right mortgage is really important. For most Canadians, the Big 5 Banks are what they will think of first when they consider taking the mortgage plunge, but the big banks are not your only choice.
Below are some essential details about getting a mortgage from one of the Big 5 Banks, or from any other kind of lender.
Canadian mortgage market update: June 2024
The normally busy spring housing market in Canada has been noticeably quiet, as buyers stay on the sidelines and await lower mortgage rates. With the Bank of Canada having carried out a quarter-point policy rate cut on June 5 (the first rate cut since March 2020), many market observers are expecting activity to pick up.
Variable mortgage rates dropped by roughly the same amount as the policy rate, and, with markets anticipating another rate cut in July, further downward pressure on rates is expected.
Fixed mortgage rates are tied to the bond market rather than directly to the Bank of Canada and its rate decisions, and in response to the Bank of Canada’s June 5 rate cut (and some economic reports out of Canada and the US), bond yields have fallen to the 3.3% range. This in turn has allowed some lenders to reduce their fixed mortgage rates.
Still, though, from a historical perspective, both variable and fixed mortgage rates remain elevated. Anyone shopping for a mortgage rate in Canada right now should be aware of the economic factors below.
- Real estate update: On June 17, 2024, the Canadian Real Estate Association (CREA) came out with the May numbers for the Canadian housing market. The latest figures reveal that home buyers are biding their time in hope of lower mortgage rates. The result is that the 51,219 properties that changed hands across Canada in May represent a -5.9% decline from the same month last year. Some 99,614 homes came to market in May, nearly twice the number of sales. As a result, the sales-to-new-listings ratio (SNLR) fell to 52.8%. CREA defines a ratio between 45 - 65% to reflect a balanced housing market, with above and below that threshold indicating sellers’ and buyers’ market conditions, respectively. The abundance of new listings juxtaposed with relatively weak demand resulted in a price decline. The national average home price came in at $699,117 in May, down by -4% annually.
Read m
ore: National real estate market stagnates in May ahead of rate cut effect - CPI update: On May 21, 2024, Statistics Canada came out with the latest Consumer Price Index (CPI) reading for the month of April, which revealed that headline inflation stood at 2.7%, down by -0.2% from March. This lower reading can be attributed in no small part to falling food prices, which registered an annual increase of 1.4%, down from 1.9% the month before. Gas prices did rise by 6.1% in April, however. Still, the biggest contributor to inflation continues to be shelter costs, which include both mortgage interest costs (up by 24.5% annually) and rents (up by 8.2% annually). The Bank of Canada should be happy with this latest CPI report, which also indicated that two key metrics – CPI Median and CPI Trim – fell to 2.6% and 3.2%, respectively. In light of this most recent CPI reading, markets are now pricing in a 50% chance that the Bank of Canada will choose to cut the target for the overnight rate at its upcoming announcement on June 5.
Read more: Canadian CPI comes in at 2.7% in April
2024 Housing market forecast
With expectations of rate cuts growing and pent-up home buyer demand apparent, CREA has revised its forecasts for 2024 and 2025 upwards.
CREA now expects that a total of 492,083 homes will change hands across Canada in 2024, up by 10.5% from 2023. Sales growth is projected to be most robust in markets where housing demand has been consistently strong, like Alberta. However, sales growth is also anticipated in markets that have hitherto been languishing due to historically low demand, such as Ontario, British Columbia and Nova Scotia. The average home price in Canada will rise by 4.9% to come in at $710,468 in 2024.
Housing market activity will gather further momentum in 2025, with sales forecast to hit 530,494 residential properties (an increase of 7.8%) and the average national home price expected to reach $760,120 (an increase of 7%).
Posted rates vs. best rates
When comparing bank mortgage rates, it’s important to know that these rates represent the banks' posted mortgage rates. The posted rate is simply the rate that the bank is advertising in public. However, banks are often able to offer even lower rates in order to secure a borrower's business. You may be able to access these discounted rates through negotiation, or by reaching out to a representative mortgage broker. Some banks offer rates several percentage points below what is posted, so it's worth taking the time to see if you can get a better offer.
Bank rates vs. broker rates
As you may have noticed, bank mortgage rates are almost always higher than those of mortgage brokers. That is because mortgage brokers have access to rates from multiple banks and credit unions, as well as insurance and trust companies. That means they can shop around for you. Brokers also receive bulk discounts from lenders based on the high volume of their business that they can pass along to you.
As a result, it’s unlikely that a bank will post a lower rate than a mortgage broker. However, if you present the lowest market rate to your bank as part of the negotiation process, they may offer to match it. That said, we don’t recommend pitting the banks and brokers against each other to compete for your business. What we do recommend is comparing broker mortgage rates and bank mortgage rates alongside each other, and deciding which offer is best for you.
Comparing mortgage rates with Ratehub.ca
Whether you're considering using a bank or broker, a variable or fixed mortgage rate, or a one to a 10-year term, we can help. Our tools find the best mortgage rates for every category and type of lender, personalized to you. Our goal at Ratehub.ca is to give Canadians the best mortgage experience from online search to close. This means offering Canadians the mortgage tools, information and articles to educate themselves, allowing them to get personalized rate quotes from multiple lenders to compare rates instantly and providing them with the best online application and offline customer service to close their mortgage all in one place.
