As some Canadian lenders expect central banks, such as the Bank of Canada, to lower influential interest rates in 2024, borrowers can expect a late Christmas present with lower rates on certain types of mortgages.
Rates of less than five per cent on specific types of fixed mortgages are on offer — the lowest Canadians looking to finance a home purchase have seen since the late spring.
“The last time we saw a five year fixed at around 4.89 or 4.99 per cent was the middle of May [2023], around Victoria Day weekend,” said Victor Tran, with ratesdotca, a website that compares mortgage rates, credit card products and insurance costs for Canadians.
Tran, along with other mortgage industry experts and economists, points to lower returns from government bonds as a reason for the drop in some mortgage costs.
“Fixed mortgage rates are directly tied to the government bond yields. So we peaked in October,” he said in an interview with CBC News, noting that the yields have since dived.
Victor Tran with ratesdotca pins the lower rates to lower government bond yields. (CBC)
Bond yields vs. interest rates
The select mortgage rates that have fallen below five per cent are currently only for fixed five year, insured mortgage terms. This would typically be mortgages with a down payment of less than 20 per cent.
Canadians in the market for that specific type of mortgage may be seeing lower costs than earlier this year.
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“They will find some savings if they have to renew a mortgage in the next coming months,” said Tran, who noted that it’s “really nice” to see some mortgage rates coming down as 2023 wraps up.
But lower government bond yields aren’t going to help Canadians who prefer variable mortgage rates. At least not yet, explained James Laird of Canadian mortgage website Ratehub.
“Bond yields react to future things, whereas variable rate mortgages and home equity lines of credit actually have to wait for the Bank of Canada to lower that overnight [interest] rate, which will cause the prime rate to drop, therefore lowering variable rates and home equity lines of credit,” he said.
Laird also pointed out that his company has been tracking housing affordability in many Canadian cities, and that while affordability has improved in some regions, that was due to house prices falling, not because of rates.
James Laird with Ratehub points out that affordability for homes in Canada has been improving in some cities, but that’s due to falling house prices and not interest rates. (CBC)
However, even if just one specific type of fixed mortgage rate has lowered, Laird believes Canadians should be pleased.
“Consumers do not like uncertainty and they certainly don’t like rates rising with an unknown top. And now that it seems like the top is probably behind us and rates are coming down, we’re seeing enthusiasm for people to reenter the housing market in the new year,” he said.
Lower rates could mean more housing demand
Some mortgage brokers, such as Vancouver’s Jacob Sneg, point out that many Canadians are waiting on lower mortgages before getting into the housing market.
“I’m constantly in touch with my clients, and they are all on the fence,” he said.
But he also cautioned that being on that fence could cost more in the long run, because as mortgage rates drop, more buyers are likely to enter the market and buyers will face more competition for homes thereby increasing the purchase price.
“If you say, ‘I’m not buying because of the high rate,’ so maybe in three months you get a better rate, but you lose on the price,” said Sneg.
Inflation might be easing but don’t expect prices to fall
Canadians have been paying more for everything as prices surged during the pandemic. But as inflation eases, prices will remain high and some economists say that’s a good thing.
Lower rates may not bring bigger economy
Canada’s central bank had been increasing interest rates to try to lower inflation, and the resulting higher borrowing costs have caused a pullback in business investment and consumer spending.
In part, this could be because Canadians had to divert more of their budgets toward higher mortgage costs.
Bank of Canada Governor Tiff Macklem arrives for the annual meeting of federal, provincial, and territorial finance ministers in Toronto on Dec. 15, 2023. (Nathan Denette/The Canadian Press)
According to The Canadian Press, researchers at the Bank of Canada said about 45 per cent of mortgages that were taken out before the central bank started raising rates saw an increase in their payments by the end of November.
The Bank of Canada researchers said nearly all remaining mortgage holders in this group will renew by the end of 2026, likely meaning higher payments for them as well, and this wave of mortgage renewals is expected to have a chilling effect on the economy.
Forecasts suggest economic growth will be weak in 2024 before picking up again toward the end of the year.
TORONTO – Cineplex Inc. reported a loss in its latest quarter compared with a profit a year ago as it was hit by a fine for deceptive marketing practices imposed by the Competition Tribunal.
The movie theatre company says it lost $24.7 million or 39 cents per diluted share for the quarter ended Sept. 30 compared with a profit of $29.7 million or 40 cents per diluted share a year earlier.
The results in the most recent quarter included a $39.2-million provision related to the Competition Tribunal decision, which Cineplex is appealing.
The Competition Bureau accused the company of misleading theatregoers by not immediately presenting them with the full price of a movie ticket when they purchased seats online, a view the company has rejected.
Revenue for the quarter totalled $395.6 million, down from $414.5 million in the same quarter last year, while theatre attendance totalled 13.3 million for the quarter compared with nearly 15.7 million a year earlier.
Box office revenue per patron in the quarter climbed to $13.19 compared with $12 in the same quarter last year, while concession revenue per patron amounted to $9.85, up from $8.44 a year ago.
This report by The Canadian Press was first published Nov. 6, 2024.
TORONTO – Restaurant Brands International Inc. reported net income of US$357 million for its third quarter, down from US$364 million in the same quarter last year.
The company, which keeps its books in U.S. dollars, says its profit amounted to 79 cents US per diluted share for the quarter ended Sept. 30 compared with 79 cents US per diluted share a year earlier.
Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs, totalled US$2.29 billion, up from US$1.84 billion in the same quarter last year.
Consolidated comparable sales were up 0.3 per cent.
On an adjusted basis, Restaurant Brands says it earned 93 cents US per diluted share in its latest quarter, up from an adjusted profit of 90 cents US per diluted share a year earlier.
The average analyst estimate had been for a profit of 95 cents US per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
ST. JOHN’S, N.L. – Fortis Inc. reported a third-quarter profit of $420 million, up from $394 million in the same quarter last year.
The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.
Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.
Revenue in the quarter totalled $2.77 billion, up from $2.72 billion in the same quarter last year.
On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.
The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
