In Canada’s mortgage market, the only constant is change

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So, about those falling mortgage rates.

Xem thêm : Will you be able to refinance your mortgage in 2025? Here’s what experts think.

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Xem thêm : Will you be able to refinance your mortgage in 2025? Here’s what experts think.

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The United States Federal Reserve made things interesting on Wednesday. It cut its key policy rate as expected but simultaneously signalled that future easing is very much in question.

That’s a problem for low-rate lovers everywhere, including in Canada. Reason being, there’s a strong correlation between U.S. and Canadian policy rates, bond yields and mortgage rates, and U.S. yields have taken flight.

Xem thêm : Will you be able to refinance your mortgage in 2025? Here’s what experts think.

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Of course, many are quick to point out that incoming President Donald Trump’s tariff threats, if he makes good on them, could send Canada’s economy spiralling. And that’s true.

However, as widely noted, those same tariffs would shoot Trump in his own foot, and he knows it. And Canada is already acquiescing to his demands by pouring $1.3 billion into our border security — which the President-to-be is taking credit for, of course.

As a result, we might not get stiff tariffs, or they might trigger stagflation and eventual rate hikes. Either way, today’s lowest fixed rates — those near four per cent — could potentially be an endangered species in the months ahead.

For now, we must wait until after Trump takes office on January 20 to know what he has in store for us. Meanwhile, this is no time to gamble on rates falling further. Given economic momentum and statistical base effects, there’s a good chance we may see little to no progress on inflation in the next couple of CPI reports.

If you look at a chart, the U.S. five-year bond yield, which typically leads Canada’s five-year, is already breaking its downtrend line. Our government bonds might not be far behind. Key point: given the link between yields and fixed mortgage rates, be sure you have a long-term rate hold if you foresee a new mortgage in your future before mid-April. A rate hold entails no obligation and guarantees your rate won’t go up so long as you qualify for the mortgage and close before deadline.

Xem thêm : Will you be able to refinance your mortgage in 2025? Here’s what experts think.

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Xem thêm : Will you be able to refinance your mortgage in 2025? Here’s what experts think.

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When it comes to mortgage shopping, flexibility isn’t just a yoga outcome, it’s a financial survival strategy. Hence, the longer your rate guarantee, the better. If all else is equal and you want the longest rate protection possible, you might consider lenders like BMO and Nesto, for example. They go out to 130 and 150 days, respectively, versus the 120-day standard limit.

Home price roulette

All this rate uncertainty casts long shadows over real estate projections. This much is clear, however: if rates go sideways-to-up in early 2025, the spring housing market will be less bubbly than expected.

But real estate depends on more than just rates. Among other things, 2025’s housing market performance hinges on:

• How much U.S. tariffs affect our growth
• How many people rush out to borrow, thanks to recent mortgage policy changes
• Whether inflation has bottomed out as some fear
• How fast Ottawa closes the tap on population growth

Anyone claiming precise foresight in this economic maze is selling snake oil in a designer bottle.

About those 30-year mortgages

Xem thêm : Nonprofit pays off mortgage on home of slain Madison police officer

In other news, the Liberals’ Fall Economic Statement promised to launch “consultations on the market development of long-term mortgages in Canada.” For some, that triggered fantasies of U.S.-style 30-year terms making their way north.

Xem thêm : Will you be able to refinance your mortgage in 2025? Here’s what experts think.

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Yet, while the security of three-decade-long mortgage rates sounds enticing, they’re mostly smoke and mirrors at this point. That’s true for numerous reasons — the main ones being threefold:

First, U.S. 30-year rates are as low as they are because Americans have a deep securitization pool with low-cost funding. That pool has taken half a century to build. If I were a betting man, I’d say Canada will not see a liquid low-cost 30-year securitization pool in the next decade — but I’d love to be wrong.

Secondly, 30-year mortgage rates wouldn’t look good next to five-year rates, even if the government established a competitive securitization mechanism (which is unlikely anytime soon). Today, conventional 30-year rates are roughly 230 basis points higher than Canadian five-year rates. That amounts to more than $11,000 in interest — per $100,000 borrowed — in the first five years alone.

Lastly, barring some unforeseen legislative change, people who try to get out of 30-year mortgages in the first five years would experience horrendous prepayment charges for exits. That’s because of how interest rate differential penalties are calculated in this country.

Xem thêm : Will you be able to refinance your mortgage in 2025? Here’s what experts think.

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The long-term mortgage consultation might be entirely academic, though. It’s possible this government won’t be around to see it get off the ground.

Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister. 

Mortgage rates

The rates displayed below are updated by the end of each day and are sourced from the Canadian Mortgage Rate Survey produced by MortgageLogic.news. Postmedia and Imaginative. Online Inc., parent of MortgageLogic.news, are compensated by certain mortgage providers when you click on their links in the charts.

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Xem thêm : Will you be able to refinance your mortgage in 2025? Here’s what experts think.

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