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Competitive Mortgage Rates in Canada Hit New Lows – Can They Drop Lower?

Is it time for homebuyers to take advantage of Canada’s mortgage rates? With the rates dropping significantly, it’s become an interesting option for those wanting to lock in a good deal.

The answer is yes; the rates will go lower, however not by a lot. The reason for this is the competition between lenders, seasonal factors, and the impact of COVID-19 on the economy resulting in the rates dropping significantly.

It may seem impossible with Canada’s mortgage rates already being lower than previous records. However, it all comes back to the competition between lenders as they continue to outdo each other causing the margin to shrink rapidly. This is what causes the rates to become record-breaking.

It is this combination of continuous demand in the home buying market along with pandemic-related drops in the interest rates that has created this rush to maintain a competitive market. This also includes a lack of listings, which is causing buyers to become increasingly interested in buying a property as soon as it is put up for sale. These supply-related issues have also impacted the house prices across the nation except in the Prairies, where the oil industry continues to struggle.


Experts On Declining Interest Rates


According to The Canada Mortgage and House Corp., the house prices may fall significantly heading into 2021 as the pandemic continues to have an effect on the job market.

While other experts are also chiming in stating the price will decelerate, but it won’t be as dramatic as expected. This includes most of the deceleration happening for condo owners rather than homeowners. The borrowing costs won’t increase either until there’s a noticeable uptick in economic growth. This will hinge on whether or not there is a second pandemic wave along with when a vaccine releases to the masses.


Factors Causing a Drop in Interest Rates


The annual inflation rate has dropped by 0.1% (August) after being 2.4% (January), which has made it easier for interest rates to remain positive. The central bank is not expected to let them drop below zero according to experts.

We might see some moderate pressure to lower interest rate!


· Demand is also affected by the lack of immigration this year, which usually stands at about 300,000 annually. And tourism’s decline is putting more Airbnb units back on the market as long-term rentals.


· When you look at how tight markets are across Canada — there are exceptions out there, especially in Alberta. This makes it hard to imagine that prices will decline in short order.


· According to economists, potential borrowing rates may sink further. Something they have never seen in their lifetime


Please visit our comprehensive guide to learn about the ins and outs of mortgages in Canada. 

Ali Zaidi UW Ali Zaidi UW 11/16/2020
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