Rates for 30-year fixed rate mortgages dropped below 7% the first week of November.
Rates have been moving higher for most of 2022, rising from around 3% to over 7%.
More inflation and economic data needs to be released to know if inflation is finally cooling down or if this is a one-time event.
Mortgage rates have been rising since the start of 2022, thanks to the Federal Reserve raising interest rates to combat inflation. When a recent consumer price index report came in with lower-than-expected inflation, mortgage rates dropped, even though the Fed recently increased rates for the sixth time.
Here is what is happening with mortgage rates and where they might be going in the coming months.
Where mortgage rates stand today
According to Freddie Mac, a 30-year fixed-rate mortgage had an average interest rate of 6.95% for the week ending November 3, 2022. The prior week ending October 27, 2022, saw an average rate for 30-year fixed-rate mortgages of 7.08%.
15-year fixed-rate mortgages also saw a drop in interest rates to 6.29% for the week ending November 3rd, down from a 6.36% average the week before.
Because mortgage rates are extremely sensitive to economic data, they tend to move quickly. For the week ending November 10, 2022, the average rate on a 30-year fixed-rate mortgage went back up to 7.08%, and the 15-year fixed-rate mortgages rebounded to 6.38%.
Bankrate’s national survey of lenders shows that as of November 16, 2022, the 30-year fixed rate fell to 6.85% and the 15-year fixed rate fell to 6.13%. The previous week, the 30-year fixed rate stood at 7.08% and the 15-year fixed rate was 6.39%.
The trend of higher rates
Mortgage rates started the year in a period of historic lows. The average rate on a 30-year mortgage was 3.22%, and 2.43% on a 15-year mortgage. But the Federal Reserve raised interest rates by 25 basis points in March and by the end of March, the average rate on a 30-year mortgage stood at 4.67%, and the average rate for a 15-year mortgage was 3.83%.
As the Fed continued raising interest rates, mortgage rates climbed higher. They seemingly peaked in late June, with the 30-year hitting 5.81% and the 15-year reaching 4.92%. When inflation data came in lower than expected over the summer, many thought that inflation was finally cooling off and the Fed would ease the pace of raising rates. This sentiment helped to bring mortgage rates down.
In early August, the average rate on a 30-year mortgage was 4.99% and 4.26% for a 15-year mortgage. Things quickly changed with the release of more inflation data showing that inflation was not slowing down. This led to additional rate hikes by the Fed and a steady climb of interest rates to where we stand today.
Why did rates fall?
Mortgage rates are impacted by the federal funds rate, which is the interest rate banks charge each other for lending money. When the Fed increases interest rates, banks’ borrowing costs increase. To offset this rise in costs, they increase the rates on their loan products.
But the fed funds rate is one of many factors influencing mortgage rates. The bond market also plays a role. Most banks do not hold the mortgages they underwrite. They package them into a product called a mortgage-backed security and sell them to investors. Since bond buyers are looking for a competitive return on their money, the interest rate on mortgage-backed securities has to be high enough to attract buyers. The question is, how high?
The most common benchmark lenders peg mortgage rates to is the 10-year Treasury bond yield. Because of this, the interest rate on the mortgage-backed securities has to be higher than the 10-year Treasury yield since there is more risk associated with the mortgage-backed security than with a Treasury bond.
Another critical factor is the housing market. If home prices are so high that buyers decide to rent instead of buy, this lower demand impacts rates. This is because if very few people are buying homes, rates have to drop to encourage buyers to come to the market. The same is valid on the other side as well. If many consumers want to buy, this can drive up mortgage rates.
The supply of homes has an impact too. If there’s inadequate supply, this can cause rates to increase if there is high demand.
Finally, unemployment plays a role. If people have lost their job, they are unlikely to purchase a home. Fear of losing a job is also a factor. With talk of a recession coming, people will not make a large purchase like that of a home if they think they might be out of work soon.
All of these factors blend together to determine where mortgage rates are. No one source determines mortgage rates. Banks consider all of the above data before arriving at a rate they feel is competitive. Since each bank sets its rate, experts advise home buyers to shop around. While one bank might charge you 7%, another might charge you 6.5%. It all depends on the above factors and your credit profile.
This isn’t to say you can shop around in today’s environment and expect to find a bank offering 3%. The rates you are quoted will be in a small range. But this shouldn’t discourage you from finding the lowest rate. Not only will a lower rate make your monthly payment smaller, but you will pay thousands of dollars less in interest over the life of your loan.
Bottom Line
While the sudden drop in mortgage rates was welcome news to home buyers and the housing industry, more information is needed to know if rates will drop again. In the previous months, we saw reports suggesting that inflation was slowing, only for it to rise again the following month.
Once we have additional information indicating that the general trend of high inflation is easing, consumers can expect lower mortgage rates. Until that happens, it is wise to lock in now, as rates could still go higher, depending on future inflation reports. If they were to start falling, home buyers could refinance to take advantage of the lower rates.
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MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
