Canadian Mortgage Loans Are Still Being Issued At Dirt Cheap Interest Rates

Canadian mortgage rates are surging higher but are mortgage rates now high? Bank of Canada (BoC) data shows interest costs for new mortgage lending climbed sharply in May. Rates are rising from record lows, stimulus-levels, and largely just normalizing. New mortgage borrowers were still paying less interest than they would have in 2019.

Uninsured Mortgages Were Going For Rates Similar To Feb 2020

Let’s start with uninsured mortgage interest, which is the majority of new debt. New uninsured borrowers paid an average of 2.97% in May, up 0.21 points in the month, and 1.01 points from last year. It’s a sharp climb for a year, but it’s also coming off incentivized stimulus rates. It’s only the highest rate since February 2020, failing to even compare to a period prior to the recession.

Canadian Mortgage Rates Were Rising But Still At Recession Levels

The average interest rate obtained by residential mortgage borrowers across Canada.

Source: Bank of Canada; Better Dwelling.

It’s true — fixed rate lending has climbed more sharply, and it’s offset by more variable debt. However, fixed rate mortgages for 5 years or longer were still slow at an average of 3.43% in May. It’s an increase of 0.17 points from a month before and 1.32 points from last year. Once again, a substantial climb representing nearly a 50% increase from last year.

Still, this isn’t a record shattering, multi-decade high for fixed term borrowing. March 2019 rates were higher, which wasn’t that long ago. Borrowers from that period on 5-year terms still haven’t renewed yet. That’s how recent it was.

Insured 5-Year Fixed Mortgages Were Only At 2019 Levels

Canadian insured mortgage interest rates are on a similar timeline, as you’d expect. Insured mortgage funds disbursed for new loans had an average rate of 3.15% in May. This is up 0.22 points for the month and 1.03 points higher from last year. May’s average is the highest seen since the beginning of time. Whoops, that’s not right — it’s the highest since February 2020. The recession discount is gone, but are costs high? Not particularly.

Canadian Fixed Rate Mortgages Are Rising But Not Exactly “High”

The average interest rate obtained by Canadian residential mortgage borrowers for a fixed term of 5-years or longer.

Source: Bank of Canada; Better Dwelling.

Insured fixed mortgages are on a sharper ascent but still at highs seen just a few years ago. New insured mortgage borrowers paid an average interest rate of 3.32% in May for a fixed rate of 5-years or longer. It’s an increase of 0.18 points in the month and 1.29 points from a year before. It’s the highest rate since April 2019 — once again, not really that long ago.

Canadian mortgage rates are climbing from record lows and doing so very sharply. They’re also likely to continue rising as inflation and interest rates move higher. It’s a 40-year high for inflation and a 2-3 year high for mortgage rates, so it’s not really a punishing, demand slowing level. Excess demand was just being stimulated with excessively low interest rates.

Leave a Comment

Your email address will not be published.