While lenders could, and might, cut their discounts from the prime rate, variables shouldn’t significantly budge until the Bank of Canada moves rates again.Gene J. Puskar/The Associated Press
There’s downward progress on mortgage rates again.
Leading fixed rates fell 0.05 to 0.35 percentage points in the past week, depending on the lender and term. The dip reflects market optimism over a more disinflationary employment picture, as well as less hawkish central bank comments.
Variable rates stayed put. While lenders could, and might, cut their discounts from the prime rate, variables shouldn’t significantly budge until the Bank of Canada moves rates again. And if you ask professional bond traders, they’ll tell you that rate cuts are now likely a mid-2024 story.
If that outlook plays out, a variable or short-term fixed rate will save you the most.
But markets often do what we least expect. Moreover, expectations of lower rates could actually boost spending and home buying – underpinning inflation and keeping rates higher for longer.
U.S. fiscal support (read, overspending) is another wild card that could worry investors and keep rates higher – both south of the border and in Canada. That’s because Canadian yields take most of their cues from U.S. rates.
Ultimately, what matters most is inflation. If we can get back to near 2 per cent by next quarter – a distinct possibility – bond yields could drift lower in anticipation of central bank rate cuts. In the meantime, monetary policy makers will do their best to send a message that rates cuts are well in the distance.
Rates were sourced from the MortgageLogic.news Canadian Mortgage Rate Survey on Nov. 9, 2023. We include only providers who advertise rates online and lend in at least nine provinces. Insured rates apply to those buying with less than a 20 per cent down payment or switching a pre-existing insured mortgage to a new lender. Uninsured rates apply to refinances and purchases over $1-million and may include applicable lender rate premiums. For providers whose rates vary by province, their highest rate is shown.
Robert McLister is an interest rate analyst, mortgage strategist and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.