Canadian homebuyers and mortgage holders are seeing a decline in fixed mortgage rates, driven by a significant drop in Canadian bond yields. According to mortgage experts, five-year government bond yields have reached their lowest point in a year, leading to fixed mortgage rates falling below 4% for the first time in months.
Mortgage broker Ron Butler of Butler Mortgage confirmed that fixed-rate mortgages, which closely follow bond yields, have seen a notable reduction, with some lenders now offering sub-4% rates.
“There was a brief moment of sub-4.0 in September 2024, and that went away,” Butler said. “And now we’re back.”
Previously, these rates were only available for high-ratio mortgages—home loans where down payments are less than 20% and require mortgage default insurance from the Canada Mortgage and Housing Corporation (CMHC). However, Butler now reports that even uninsured mortgages are seeing rates below 4%, marking a major shift in affordability.
“If it’s a high-ratio mortgage, 3.89%, that is radically less than it was a year ago,” he noted.
With mortgage rates coming down, financial experts say borrowers are gaining more confidence in fixed-rate options, which had previously been considered too expensive.
Frances Hinojosa, CEO and co-founder of Tribe Financial Group, noted that while some economists predict further rate cuts by the Bank of Canada by the end of the year, homebuyers and homeowners are not waiting to secure lower fixed rates.
“With fixed rates now being a lot lower compared to where they were a year ago, there’s more of a comfort level,” Hinojosa explained. “People are saying, ‘OK, that fixed rate seems fine to me. I’m comfortable with the payments.’”
For those renewing their mortgages, the drop in rates means an opportunity to secure a better deal.
“For consumers, it’s always smart to not take the first offer that you get on your renewal. Shop it around,” Hinojosa advised.
With a high volume of mortgage renewals expected in 2025, lenders are becoming more aggressive in retaining customers, meaning existing clients can negotiate lower rates if they bring in competing offers.
“Once you have an actual quote from another bank, your bank will react,” Butler added.
However, for potential homebuyers, the situation remains uncertain. While lower rates make borrowing more affordable, Butler warned that the economic slowdown pushing bond yields lower could indicate a potential recession, which could drive home prices down further.
“The guy who’s got a renewal has only one question: Am I getting the best deal?” Butler said. “But those thinking about buying need to ask whether they’re getting a good rate and whether they’re buying at a good time.”
As the Canadian housing market navigates shifting economic conditions, both homebuyers and mortgage holders are advised to carefully consider market trends, interest rates, and future financial stability before making major decisions.