La Jolla Micro Endodontics
A man is giving keys to a woman in a living room.
By Don Scott February 11, 2025
Purchasing an owner-occupied rental property in Canada can be a strategic way to build wealth while securing a home for yourself. But if you’re planning to put down less than 20% of the property’s purchase price, you’ll likely need mortgage default insurance. Here’s what you need to know about how mortgage default insurance works for owner-occupied rental properties.
By Don Scott January 10, 2025
What are Canadian mortgage rates going to do in 2025? We do not have a crystal ball, and the markets are sending mixed signals right now. However, we do think that more rate cuts are coming but are concerned that fixed mortgage rates are near their floor. What might all this mean? – read on. 2025 Mortgage Rate Prediction We expect variable mortgage rates to decline a further 0.50% to 0.75% in 2025. This will bring them below fixed mortgage rates for the first time since 2022. It is historically the norm for variable mortgage rates to be below fixed mortgage rates. This means five-year variable mortgage rates could be in the range of 3.6% to 4% by the end of the year. We do not expect much change in fixed mortgage rates in 2025. Bond yields have modest rate cuts already priced in and are resisting further declines. The recent steep increase in the US 10-year bond tells us that the bond market thinks central banks are wrong to cut rates further. We must pay heed to those signals since fixed mortgage rates depend on the bond market. We anticipate five-year fixed mortgage rates to range between 3.8% and 4.5% for most of the year. We can only rely on market inputs to generate our own expectations for mortgage rates in 2025. Those key inputs include: The Bank of Canada has indicated more rate cuts may be coming in 2025, but the pace and size of the cuts will be more gradual; Economists are forecasting a weakening Canadian economy. When the economy weakens, the central bank tends to cut rates to provide economic stimulus; The US Federal Reserve has stated they are in no rush to cut rates; The US 10-year bond has risen by 0.85% since the Federal Reserve began cutting rates in Sept 2024; Canadian 5-year bond yields are unchanged since August 2024 and only 0.15% lower than in mid-Jan 2024; US Federal Reserve reluctance to cut rates may limit how much the Bank of Canada can cut. When the Bank of Canada cuts rates more than the US does, it hurts the value of the Canadian dollar; and Analysts in Canada and the US expect rate cuts in 2025. There are many risks that are not priced in yet that could materialize. Economic weakness will increase the likelihood of more rate cuts and could even reduce bond yields. Economic strength will eliminate the need for rate cuts and could even lead to higher rates. There are also political and geopolitical risks that are not our place to opine on. They are difficult to predict but could significantly impact our interest rate markets in 2025, a year currently marked by uncertainty. What Happened to Mortgage Rates in 2024? The Canadian market entered 2024 with high expectations for multiple Bank of Canada interest cuts, starting as early as March or April. The cuts came a bit later than anticipated, with the first cut on June 5. We saw cuts totaling 1.75% from June through December. The last two cuts, in October and December, were consider ‘jumbo’ cuts of 0.50% (the usual cut is 0.25%). These cuts had the expected direct impact on variable-mortgage rates which dropped by the same amount. Fixed rates are ‘forward-looking’, so they move when expectations change. As the chart below shows, they dropped in anticipation of the cuts but, once the rate cuts gathered steam later in the summer, they remained relatively flat. 
By Don Scott January 2, 2025
If you’re in the market for a mortgage, one key consideration is the rate type on the mortgage you choose. Will you opt for a fixed-rate mortgage or a variable-rate mortgage? Fixed rate mortgages are the most popular but does a variable-rate mortgage make sense today, now that rates have been declining?
A man is holding a calculator and a model house.
By Don Scott December 17, 2024
High rates and increasing house prices have made qualifying for a mortgage in Canada more difficult. Recent declines in mortgage rates have been helpful but housing affordability is still stretched. Meanwhile, the government sees the housing and mortgage markets as opportunities to score political points and has repeatedly intervened in the market, at times stimulating demand and other times trying to curb the increase in credit growth and/or house prices.
By Don Scott November 25, 2024
With the Bank of Canada in a rate-cutting cycle, many Canadians expect mortgage rates to continue to drop. This may be true for variable mortgage rates since they track changes in the Bank of Canada rate. However, fixed mortgage rates don’t directly follow the Bank of Canada’s overnight rate. Instead, they are tied to the bond market, which has shown mixed signals recently.
A clock and a house are on a seesaw.
By Don Scott November 20, 2024
Now that rates have begun to decline again, many Canadian mortgage borrowers are considering variable interest rate options. These types of mortgages can save money in the right circumstances, but they come with risks that need careful evaluation.
By Don Scott September 26, 2024
How the Amortization Period Impacts Your Mortgage The recent announcement from Ottawa allowing first-time homebuyers to secure an insured mortgage with a 30-year amortization period, up from the previous 25-year limit, has significant implications for borrowers. This change highlights the fact that different amortization periods are possible and that it is important for Canadian mortgage borrowers to understand how the amortization period affects the cost of their mortgage. While extending the amortization period can reduce monthly payments and provide a more affordable entry point into the housing market, it will increase the total cost of the mortgage over time. Let’s delve into the details and explore how borrowers can address this issue effectively. The Basics of Amortization Amortization refers to the length of time it would take to pay off your mortgage at the current mortgage rate. The amortization period assumes regular monthly mortgage payments. Each monthly mortgage payment covers both the interest on the loan and a portion of the principal amount. After every monthly payment, the remaining principal balance of your mortgage is reduced by the portion of the payment that goes toward principal. Over the amortization period the remaining principal balance will decline to zero. You will hear and read that the longer 30-year amortization period is good for mortgage borrowers. However, there is a trade-off in selecting the longer amortization period that borrowers need to be aware of. The benefit is that the longer the amortization period, the lower the monthly payments. Stretching out the repayment schedule results in a lower required payment per payment period. The longer amortization period can help borrowers qualify for a mortgage. A longer amortization may also provide some payment relief for existing borrowers struggling with a mortgage renewing at high rates. The trade-off to this short-term payment reduction is that the longer amortization results in a higher amount of interest paid over the life of the loan. In other words, the short-term relief from a longer amortization comes at a cost. Numerical Examples Let’s consider a mortgage of $400,000 with an interest rate of 4%. The chart below shows the difference in monthly mortgage payments for different amortization periods.
By Don Scott September 19, 2024
The Prime Rate has declined by 0.75% since June. That is great news for mortgage borrowers facing a renewal in the coming months. What’s better news is that the market is predicting that interest rates will decline further from here. While a mortgage booked at very low rates between 2019 and 2021 is facing renewal at higher rates today, these rate reductions are improving the environment for mortgage renewals going forward.
A woman is signing a document next to a model house.
By Don Scott September 17, 2024
Ottawa made a significant announcement on September 16, 2024, regarding more flexible rules for mortgage borrowers. They are making two key changes to the rules
SHOW MORE
Share by: