Current Interest Rates

Fixed interest rates have been decreasing steadily over the past four months. At the same time, the variable rates have decreased due to the prime rate decreasing. At this time, half of our clients are going with a variable rate and the rest (on average) are going with the 5-year fixed rate for insured mortgages the 3-year fixed rate for uninsured mortgages.

The changes in rates above in (mostly) green show the difference from 1 month ago.

It’s important to note that these rates are not final – we can get better rates in many circumstances. The rate offered is subject to: your lender, date of closing of your mortgage, as well as mortgage size. The sooner the mortgage closes from the rate request, the better the rate, and the higher the mortgage size, the better the rate. 

Rate Analysis: 

The Bank of Canada (BoC) decreased the overnight rate by 0.25% to 4.50% on July 24th. This has decreased bank prime rates to 6.70%.

It is widely expected that more rate cuts will be on the horizon. At this time, the market has priced in three more rate cuts in 2024. The next Bank of Canada meetings are on September 4th, October 23rd, and December 11th.

Fixed mortgage rates are still crawling downward, with the largest decreases coming in at the 5-year fixed rate option. The yield curve is still inverted for fixed rates which means that the longer the term, the lower the rate. Historically, the shorter the term, the lower the rate.

So what should people do…? Should they go fixed? Variable? What about going with the 5 year versus the 3 year fixed rate?

With interest rates coming down, one would think that going with a shorter term is the best bet (so that the borrower can renew at lower rates sooner). However, the variable rate gives us quite a bit of flexibility with it comes to rates. 

First, I think that, in many cases, homeowners who pick the variable rate will be better off over 3 to 5 years. However, the key here with the variable rate is that this product allows a homeowner to convert and “lock-in” their variable rate into a fixed rate. And, since we’re expecting fixed rates to decrease over the short term, getting a variable rate for 3-6 months and then converting to a fixed rate may be the right choice.

I personally just renewed one of my mortgages into a variable rate, with the expectation that we will be converting this rate to a lower fixed rate within a few short months.