Mortgage rates have continued to change since our last post about them in 2024. The website canadianmortgagetrends.com notes that mortgage rates fell almost 2% by the end of the year. While the above website suggests that there could be hikes in mortgage rates again this year, nesto.ca does not think this is likely. This website also lists the lowest current rates at around 4%, and says that Canadian banks are expecting a further drop of 75 “base points” by the end of this year. To clarify, the same website says that a single “base point” represents 0.01%. With this in mind, a 75 base point decrease would mean that, by the end of 2025, banks across Canada will have rates ranging from 3%-2.25% for a variable mortgage. Unfortunately, for a fixed rate mortgage, Global News reports that it looks like the rate will stay around 4% for the foreseeable future.
Patterns have shown that mortgage rate decreases can sometimes mean that prices could rise in the real estate market. However, Global News implies that it will take a little bit of time before this pattern kicks in again, reporting that they expect 2025 to have a market that is more accessible to new buyers, and then noting that real estate experts later expect prices to go up due to lower rates. Furthermore, they point out that the cap of home pricing for borrowing for an insured mortgage (which allows a smaller down payment than an uninsured mortgage) has recently been increased from $1 million to $1.5 million, meaning that the market for luxury homes will also have the chance to grow even more in 2025.
While this exciting news will eventually give people more funds that will circulate back into the Canadian economy, people with existing mortgages will not experience immediate cost drops. The rate cuts from the Bank of Canada are meant to affect long-term change and affordability of life in Canada, so watch for a change in housing costs over the course of 2025.