Canadian Mortgage Rate Trends for 2021

In this article, you will find key information about current mortgage rate trends in Canada.

The Bank of Canada (BoC) target rate, which is linked to variable mortgage rates, is at its lowest right now, so don’t expect any further drops!

BOC has made a commitment to keep key rates low until the economy begins to recover. Many forecasters are predicting economic recovery will not gain pace until 2022 / 2023.

Financial crisis


Unemployment is up, with workers under 24 and over 55 being worse affected. With the Bank of Canada promising to hold interest rate at 0.25% until the economy recovers, the labor market picks up, and inflation reaches a steady and consistent 2%, which has not happened since the 2008 financial crisis.

Naturally, other considerations should be considered in the economic and financial markets that could drive up mortgage rates marginally over the next year.

How the global pandemic has affected us


With the announcement of a successful vaccine, the markets began speculating on a potential end to the global pandemic. The Government of Canada’s five-year bond yields fell to 0.41 percent in August from 1.64 percent last December.

Current Home Price Forecasts for 2021


The Canada Mortgage and Housing Corp., which is the country’s largest public mortgage provider, forecasts that house prices could fall by double-digits in early 2021 due to the impact COVID has had on the economy and jobs.

Other analysts predict price drops likely in condos rather than houses but not as steep as previously indicated. But it is thought borrowing costs won’t increase appreciably until a substantial economic recovery is well underway.

COVID has caused full time and part-time job losses, which has brought down the costs of rents and condo prices in urban cores. At the same time, work-from-home arrangements boost cottage-area prices and prompt an exodus from high-density urban centers.

Robert Hogue, a senior economist at RBC Royal Bank, said in a telephone exchange that focused on the housing market: “What COVID has done to housing demand is shift it a lot to low-rise and single-detached homes,” he went on to say, “Single-detached homes will be more resilient than what CMHC has been talking about.”

We have seen that over the last few weeks and months, there have been many predictions about the challenges faced in today’s economic environment, for example:

  • CREA – The Canadian Real Estate Association +9.1% – Predict that activity in the current housing market will stay relatively healthy through 2021, with prices either continuing to climb or remaining steady in all regions, which could mean supply shortages in Ontario and Quebec.
  • RBC (+0.6%) and Scotiabank (+0.4) –  Feel a flat growth is to be expected due to pandemic-related economic headwinds and continued weakness in regional condo markets, and growing affordability concerns.
  • RE/MAX Canada – +4% to +6% – Regional executive vice president Elton Ash said, “While we’ve seen a significant shift in buyer preferences this year, we believe factors such as the supply issue, pent-up demand, and historically lower interest rates will continue to fuel activity in 2021.”
  • CMHC: -9% to -18% – Chief Economist Bob Dugan has commented on the risk in the market and said he felt that current demand levels aren’t sustainable.  He was reported to have said in September, “I’m not convinced that we have a sustainable basis for housing demand in the economic disturbance that’s going on related to COVID-19, I certainly believe in the overall trend that there’s scope for price declines, for weaker demand, and after that resolves itself eventually a recovery once we have a vaccine in place.”

HSBC


HSBC bank has brought out a variable mortgage rate of 0.99 percent, which industry watchers believe is the first such offer below 1 percent ever in Canada.

HSBC promoted the rate to high-ratio, for insured mortgages only, which means buyers with less than 20 percent down will have to pay to insure their mortgage, which will protect the lender in case of default. The offer is for a five-year closed term – though the rate, of course, may vary up or down over that time, as it’s tied to the bank’s prime lending rate.

As the Bank of Canada announced its decision to slash its rate to almost zero and keeping it there until 2023, banks like HSBC with variable-rate loans that are typically tied to the central bank’s rate are likely more affected by what’s happening in the bond market.

But while HSBC’s rates may be designed to entice consideration from anyone prepared to deal with a variable-rate loan’s uncertainty, many of the other lenders are now within a few basis points of that one percent threshold already. Fixed-rate loans in the range of 1.5 percent are ample right now because bond yields have never been lower.

But consider: While borrowers and enjoying mortgage rates hitting an all-time low, this comes at a price, and this cost is a weaker economy.

Conclusion


The Bank of Canada (BoC) target rate, which is linked to variable mortgage rates, is at its lowest right now. Unemployment is up, with workers under 24 and over 55 being worse affected, with the Bank of Canada promising to hold interest rate at 0.25% until the economy recovers. The Canada Mortgage and Housing Corp., the country’s largest public mortgage provider, forecasts that house prices could fall by double-digits in early 2021 due to the impact of COVID. HSBC bank has brought out a variable mortgage rate of 0.99 percent, which industry watchers believe is the first such posted offer below 1 percent ever in Canada.

Frequently Asked Questions About Canadian Mortgage Rate Trends


What are your sources of information?

Our sources include a wide range of national and international Banks and financial institutions such as HSBC and the Bank of Canada. As well as CREA, RE/MAX, CMHC and RBC.

How long will interest rates stay low for in Canada?

Bank of Canada plans to keep interest rate near zero until 2023.

What is the Canadian interest rate today?

Variable closed: 1.65%
1 year closed: 1.64%
3 year closed: 1.59%
5 year closed: 1.69%
10 year closed: 2.84%

What is the BoC Interest Rate Forecast for the Next 5 Years?

This will remain at 0.25% for 2021 and remain unchanged in 2022.

What is the HSBC variable mortgage rate?

HSBC bank has brought out a variable mortgage rate of 0.99 percent.

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Sarah Clark

Author

A native of St. Catharines, Sarah went to the University of Western Ontario where she earned a B.A. in Political Science and History. She loves to read books and is very involved in her community, with vast experience in the non-profit, education and health care sectors. Sarah is an experienced writer on business and technology, as well as media relations, social media and communication.

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