Can you believe it’s been almost 2 years since mortgage rates first started their climb? For some, these 2 years have flown by, while for others, it’s been a financial nightmare.

The Bank of Canada raised its policy rates 10 times between March 2022 and July 2023, totaling 4.75% in increases for variable-rate mortgages. Though not directly tied to the Bank of Canada’s rate increases, fixed mortgage rates also saw major increases because of increasing bond yields.

Between higher costs of food, fuel, and services, increased mortgage payments crushed household budgets for those on variable rates, or for those who had a mortgage renewal during this time. Talk about sticker shock.

But we’re not here to dump bad news on you. Quite the opposite. Interest rates appear to have seen their peak, which became apparent many months ago. We’re already starting to see relief in fixed rates as government bonds ease. Though there hasn’t been a downward movement in variable-rate mortgages yet, the Bank of Canada is expected to start its slow and steady decline by the end of quarter 2 this year (2024).

If you’re interested, most of the big banks publish their interest rate forecasts publicly, so it’s easy to stay current with expectations and timelines.

Here are some frequently asked questions that we’ve been helping homeowners understand lately:

• When will mortgage rates drop?
  • Mortgage rates are expected to start dropping by mid-year (or close to the end of quarter 2).
• Will we ever see pandemic-level mortgage rates again (1% – 2%)?
  • It’s very unlikely for the foreseeable future.
• How much will mortgage rates drop?
  • Interest rates in a healthy economy (historically speaking) sit between 3% – 4%. Slowly but surely, we’ll get back down to these levels.
• Will my variable rate mortgage payment drop?
  • Yes, as the Bank of Canada starts the descent on their policy rate, you will immediately see relief in your variable rate mortgage payment.
• If I converted my variable rate mortgage into a fixed rate mortgage, can I switch back?
  • Unfortunately, a variable rate can convert to a fixed rate, but not the other way around. Unless you break your mortgage and refinance, you will have to stick it out with your fixed-rate mortgage.
• Should I choose a fixed-rate mortgage or a variable-rate mortgage?
  • This will also be a question that’s hard to answer as a one-size-fits-all. It’s very circumstantial, and a lot of time and effort go into assessing your options and lifestyle before advising on the best options for you.
• What if I’m stuck with a mortgage payment I can’t afford?
  • While we hope this is not your case, sadly many people are in this boat. If you can’t afford your mortgage because of how much rates have increased, speak with your bank or broker asap to see if there are measures in place to help you reduce your payment.

There are many more questions that might arise. If this blog does not answer your questions or bring clarity to what is expected for mortgage rates in the year ahead, call us so we can delve a little deeper on this topic. Often, it helps to discuss your specific scenario rather than in general terms. We’re always ready to have these conversations. Call us now at (905) 455-5005.