Mortgage rates drop in Canada, opening up opportunities for homebuyers
Fixed mortgage rates have dropped by a full percentage point in recent months, making it a good time for Canadians to consider buying a home.
The five-year Government of Canada bond, which is used to set five-year fixed mortgage rates, topped 3.8% on Monday morning before settling somewhat. This is down from a high of over 4.5% in April 2023.
As a result, many lenders have lowered their fixed mortgage rates. For example, the Royal Bank of Canada is now offering a five-year fixed mortgage rate of 4.49%, down from 5.49%.
This drop in rates could make it more affordable for Canadians to buy a home.
For example, a buyer who takes out a $300,000 mortgage at 4.49% would pay $1,586 per month in principal and interest. This is $225 less per month than they would have paid if they had taken out the same mortgage at 5.49%.
The drop in rates could also help to boost the Canadian housing market, which has been slowing down in recent months.
The Canadian Real Estate Association (CREA) reported that home sales fell by 3.9% in November 2023 compared to the previous month. This was the fifth consecutive month of declines.
The CREA also reported that the average home price in Canada fell by 1.3% in November 2023 compared to the previous month. This was the first monthly decline in average home prices since April 2020.
The drop in mortgage rates could help to reverse these trends and boost the Canadian housing market.
However, it is important to note that interest rates are still higher than they were a year ago.
The Bank of Canada has raised its overnight lending rate eight times since March 2023 in an effort to combat inflation.
This has led to higher borrowing costs for consumers and businesses. As a result, it is important for Canadians to carefully consider their financial situation before taking out a mortgage.
If you are considering buying a home, it is important to talk to a mortgage broker or lender to get pre-approved for a mortgage. This will help you to determine how much you can afford to borrow and what your monthly payments will be.
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