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Canada: interest rates and real estate

by Taylor Pipe on 24 Mar 2021

Mortgage brokers are warning that after record low-interest rates, the market is set to rise in 2021.

The COVID-19 global crisis introduced an incredible opportunity for homeowners and lenders alike. Interest rates in Canada hit historic lows which allowed many people to get into the real estate market, or at least make their down payment saving journey easier. According to Global News, Canadians took out $118 billion in additional mortgage debt in 2020. This represents a 7.6% increase in growth; the fastest increase we've seen in ten years.

The low-interest-rate impact

Across Canada, mortgage rates are rising and with the high price of housing, economic recovery has definitely been happening. But, it's also been raising red flags for policymakers. This could lead to restrictions on property investments for investors from abroad, but can also lead to rate hikes, although the Bank of Canada says otherwise.

"We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved," the Bank of Canada said in a statement.

While many Canadians are feeling the squeeze of the pandemic-driven economy and are worried about paying off credit cards, others are paying attention to forecasts from economists relating to the housing market and wondering if they really did get into the market at a good time or not.

According to the Financial Post, "after an 8.5% jump in the aggregate benchmark price for a home in 2020, the lender’s economists see 8.4% growth in a gradually softening 2021, to $669,000, 'setting the stage for a more modest' 3.9% gain in 2022."

The article then goes on to explain capitalist economists are projecting that house inflation will increase past 10% during the first quarter of 2021.

However, the rise in mortgage rates and interest rates isn't always necessarily bad news. As mentioned before, the good news is that this means that the Canadian economy is in a period of rehabilitation and low-rate mortgages are giving people who otherwise would not able to break into the market, a chance. Economic recovery is always a cause for celebration.

Taking advantage of low interest rate to move into new home

According to Tiff Macklem, governor of The Bank of Canada

The Bank of Canada, (BOC) released a statement from officials, led by Tiff Macklem, saying that the BOC is committed to keeping low-interest rates until 2023.

“Our main message today is that it will take quite some time for the economy to fully recover from the COVID-19 pandemic,” Macklem said during a press conference. “The Bank of Canada will keep providing monetary stimulus to support the economy through the recovery.”

The average mortgage rate for a 3-year fixed bank rate is 1.5% according to So, for example, if you took out a mortgage for $450,000 and your interest rate is 1.54% over 30 years, you'd be paying $1561.69 monthly. If you think about it, your monthly mortgage payments are less than the average price of a two-bedroom apartment for rent in larger cities like Toronto and Vancouver.

"Housing construction and resale activity have been particularly strong. We noted the large house price increases in some markets that will warrant close monitoring for speculative activity," said BOC Deputy Governor Lawrence L. Schembri.

Purchasing with a mortgage broker

Banks play a large role in the type of mortgage a lender can receive. They also play a part in commodity prices, quantitative easing, monetary policy, and lending criteria for banks that offer mortgages to lenders. Mortgage brokers can help you navigate the monopoly of lending from banks and assist in finding you the perfect variable rate, or prime rate mortgage.

For those looking for a prime rate on their fixed-term mortgage, one of the best things you can do is consult with mortgage brokers to help you find the best mortgage rates and mortgage amount available in the location of your choice. When you're looking to purchase a property, knowing the terms of your mortgage and other data necessary to make informed decisions is crucial.

When working one-on-one with a mortgage broker, talk about what you're looking for in your mortgage rate and what time of prime rate you're looking for. Mortgage rates fluctuate, so mortgage experts can help you decide when is the best time to buy in Canada while also shopping around for the best term for your specific goals from a variety of lenders.

Working with a bank and brokers to purchase 3-year fixed rate mortgage term

The lasting impact on mortgage rates in Canada

It's no secret that COVID-19 has rocked Canada and the rest of the globe. Mortgage rates hit a record-low in 2020; something we never thought we'd see. When it comes to finding a great interest rate, consider how long you'll be borrowing for and if you're getting a prime rate.

Data has shown that the Canadian economy is resilient and mortgages are a key player in our economic restoration process. The Bank of Canada has done Canadians a huge favour by being able to pledge to keep interest rate lows until 2023. As an investor, it would be wise to cash in on these historically-low rates as soon as possible.

However, in the future, the government may introduce legislation that makes it harder for home lenders to acquire a mortgage. We may also see a limit on foreign investment opportunities to help curb inflation rates. That's why it's so important to talk to your bank to assess your opportunities. Working with a mortgage broker can help you get the mortgage rates that meet your needs and help you cut through red tape when you're looking to purchase a property.

Either way, if you're hoping to get a good mortgage, now is the time. The best advice is to get into the real estate market in Canada as soon as possible because these low-interest rates aren't sticking around forever, and we'll definitely miss them when they're gone.

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