Mortgage rates for December 2024 . A detailed guide

Latest Mortgage Rates in Canada: A Comprehensive Overview (December 2024)

As we approach the end of 2024, Canada's mortgage market is facing a period of transition. After years of rising rates, the Bank of Canada (BoC) has signaled a shift toward a more stable interest rate environment. For homeowners and prospective buyers, understanding the latest mortgage rates is crucial for making informed decisions. This article will provide an overview of the current mortgage rate trends in Canada, factors influencing these rates, and tips for borrowers navigating the market.

1. Current Mortgage Rates in Canada (December 2024)

As of December 2024, mortgage rates in Canada are experiencing some relief after a prolonged period of hikes initiated by the Bank of Canada to combat inflation. While rates remain higher than historical averages, they are beginning to stabilize and show signs of moderation.

Fixed-Rate Mortgages

Fixed-rate mortgages are popular because they offer predictable payments for the life of the loan. As of December 2024, the average fixed-rate mortgage rates are as follows:

• 1-year Fixed Rate: 6.00% to 6.50%

• 5-year Fixed Rate: 5.50% to 6.20%

• 10-year Fixed Rate: 5.70% to 6.30%

These rates represent the broad range available to borrowers with good credit profiles and may vary depending on the lender, the type of mortgage, and the borrower's down payment.

Variable-Rate Mortgages

Variable-rate mortgages are linked to the Bank of Canada’s overnight rate, which influences the prime lending rate. In recent months, variable mortgage rates have remained relatively high due to persistent inflationary pressures, but the pace of rate hikes has slowed, which may suggest stabilization in the near future.

• Prime Rate (as of December 2024): 7.00% to 7.25%

• Variable Rate Mortgage: Typically 0.70% to 1.00% below prime, resulting in rates around 6.00% to 6.50% for well-qualified borrowers.

Adjustable-Rate Mortgages

Adjustable-rate mortgages (ARMs) adjust periodically based on changes to the prime rate. These can be an attractive option for borrowers who anticipate falling interest rates in the coming years, but they also carry more risk than fixed-rate options.

• Common Rates: 6.00% to 6.50%

2. Factors Influencing Mortgage Rates in Canada

Several factors are currently influencing mortgage rates in Canada:

Bank of Canada’s Monetary Policy

The BoC plays a central role in setting the overnight rate, which influences the prime rate and, ultimately, mortgage rates. Over the past few years, the BoC raised rates in an attempt to curb inflation, reaching a peak of 5.00% in mid-2024. However, recent signs of economic cooling and slowing inflation have prompted some analysts to predict that the BoC may hold rates steady in the short term, or potentially reduce them in 2025 if inflation targets are met.

Inflation Trends

Inflation remains a key concern for the BoC. As of late 2024, inflation has moderated from its peak levels earlier in the year, but it remains higher than the BoC’s target range of 2%. Continued moderation in inflation could prompt the central bank to adopt a more dovish stance in 2025, potentially leading to lower mortgage rates.

Economic Growth and Employment

Canada's economy has shown resilience, with steady employment growth and strong demand in housing markets like Toronto, Vancouver, and Montreal. However, signs of slowing economic growth and the potential for a mild recession in 2025 could create pressure for the BoC to reduce interest rates to stimulate economic activity.

Bond Yields and Global Trends

The yields on Canadian government bonds directly impact fixed mortgage rates. As bond yields rise or fall, lenders adjust their rates accordingly. Global factors, including US Federal Reserve policies, geopolitical events, and trade relations, also influence Canadian bond markets.

3. Regional Mortgage Rate Variations

While the overall trend in mortgage rates is similar across the country, regional factors can cause slight variations in the rates that borrowers are offered. Larger cities like Toronto, Vancouver, and Montreal often experience slightly lower mortgage rates due to higher levels of competition among lenders. In more rural or remote areas, rates may be slightly higher due to increased lending risk and reduced competition.

4. What’s Next for Mortgage Rates in 2025?

Mortgage rates in Canada are expected to stabilize in 2025 after the aggressive rate hikes of the previous years. Analysts predict that the Bank of Canada will hold its policy rate steady through the early months of 2025, with the possibility of rate cuts later in the year, depending on inflation and economic conditions. This means that fixed-rate mortgage rates could also begin to decrease, making home buying more affordable for some Canadians.

However, borrowers should be mindful of the risks of waiting for rates to drop significantly. Economic conditions can change quickly, and the future of the housing market remains uncertain. A strategic approach, including consultations with mortgage brokers or financial advisors, is recommended for anyone looking to buy or refinance a home in the coming months.

5. Tips for Borrowers in the Current Market

1. Consider Locking in a Fixed Rate

With rates still higher than the historical average, locking in a fixed-rate mortgage can provide stability and predictability, especially for those who are planning to stay in their home for an extended period.

2. Shop Around for the Best Rate

Not all lenders offer the same rates, and shopping around for a mortgage can result in substantial savings over the life of the loan. Borrowers should compare rates from big banks, credit unions, and alternative lenders.

3. Refinance Your Mortgage

If you are currently holding a mortgage with a variable rate, consider refinancing to a fixed rate if you anticipate a rise in the prime rate. On the other hand, if rates decrease in 2025, refinancing may offer an opportunity to secure a lower rate.

4. Factor in Other Costs

Mortgage rates are only one part of the equation when buying a home. Borrowers should also factor in additional costs like property taxes, insurance, and potential maintenance or renovation expenses.

5. Consider a Short-Term Mortgage

If you're planning to sell or refinance in a few years, a shorter-term mortgage may be a good option. These typically come with lower rates than long-term fixed mortgages and allow for greater flexibility in the future.

6. Conclusion

As of December 2024, Canada’s mortgage market is experiencing a period of relative stability after a turbulent rise in rates over the past few years. Fixed-rate mortgages are trending between 5.50% and 6.20%, while variable-rate mortgages are hovering around 6.00% to 6.50%. The Bank of Canada’s upcoming decisions on interest rates, inflation trends, and broader economic conditions will play a pivotal role in shaping mortgage rates in 2025.

For potential homebuyers and existing homeowners looking to refinance, it is essential to remain informed about these trends and consult with mortgage professionals to secure the best possible rate. While the market is stabilizing, the future remains uncertain, so careful planning and flexibility are key to making the most of current mortgage conditions.