The Current State of the Mortgage Rates in Canada

During this pandemic, many clients and friends have been asking me what is going on with mortgage rates, and they always assume that interest rates are continuing to drop based on the markets. However, with all of the economic uncertainty, and the fact that over 1 million Canadians have filed for Employment Insurance, lenders and investors are worried about increased insolvency. With large increases to risk premiums, lenders are having to spend more to borrow the funds to mortgage clients which is why we have seen most low promotional rates expire. Right now fixed rates are comparable to the mortgage rates we had in February before this hit North America (between 2.69%-3.24% depending on the type of mortgage needed). 

In regards to variable rates, the Bank of Canada dropped the overnight lending rate 3 times since the onset of the COVID-19 pandemic, and the majority of lenders have dropped their Prime rates in the days following those rate drops: 

• Mar.4 = 3.45%
• Mar.16 = 2.95%
• Mar.27 = 2.45%​

Variable mortgage rates are set in relation to Prime, and 5 weeks ago I had some variable rates of Prime minus 1.05%. Back then Prime was 3.95, meaning that client would have a rate of 2.90%. Today, that client would be at 1.40%. However, due to insolvency (i.e., clients missing payments), deferrals, and heightened risk of unemployment across the country, lending institutions have drastically reduced the discount to Prime for new customers. As of today we are seeing most new owner-occupied variable terms coming in at Prime - 0.10% to Prime + 0.25%, giving clients a rate of 2.35%-2.70%. Today's best fixed rates are coming in around 2.69%, and so the variable option is one to think about, especially if you think that it could take the economy awhile to bounce back.