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Canadian mortgage rates

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How do I find the best mortgage rate in Canada?

It’s best to shop around when looking for the best mortgage rate because even a little percentage can result in significant savings when it comes to mortgages.

Finding a competitive rate can be done first by comparing mortgage rates online. However, you’ll also want to consider the many other factors that go into finding the best mortgage for your needs. For instance, you might require the flexibility of an open mortgage (as opposed to a closed mortgage that restricts you from raising your mortgage payments). Alternatively, you might prefer a mortgage with a shorter term—say, three years—instead of five.

You’ll have a thorough understanding of all the borrowing costs associated with your mortgage by thinking beyond the rate and taking into account factors like payment flexibility, the amortization and terms of your mortgage contract, and any potential penalties and administration fees associated with breaching the agreement.

What are mortgage rates in Canada right now?

The Bank of Canada interest rate announcements influence the mortgage rates offered by banks and lenders. You can read our February mortgage rate outlook for more information on where we think mortgage rates might be heading.

How do I compare mortgage rates in Canada?

Choosing the right mortgage can feel overwhelming. How do you pick a mortgage other than looking at the mortgage rate? The best mortgage is one that works for you, and it isn’t always about getting the lowest mortgage rate.

For example, while many Canadians opt for a 5-year mortgage term, you may be planning to upgrade and sell your property in 2-3 years to accommodate a growing family. If that’s the case, consider looking at a shorter term or going with a variable mortgage, which will have lower penalty fees if you need to break your mortgage earlier.

If you’re the type of person who hates the idea of having any debt, then you may want to consider mortgages with flexible prepayment options. While some lenders will charge penalty fees for additional mortgage payments, other lenders allow borrowers to make extra mortgage payments at no charge. This option enables you to pay down your mortgage as quickly as possible.

While those are two simple scenarios for you to consider, there are thousands of mortgage products available to suit your needs. The final decision is partly financial and partly emotional, based on your own risk tolerance and lifestyle preferences.

When choosing a mortgage, think about what elements are most important to you. For example:

  • Maintaining cash flow with the lowest monthly mortgage payment
  • Paying off your mortgage quickly
  • Having the flexibility to break a mortgage while minimizing penalty fees
  • Using a specific mortgage lender
  • Having consistent, predictable mortgage payments

Other than the mortgage rate, you’ll also want to consider your future plans:

  • Borrowing money for renovations
  • Using excess home equity to invest
  • When you might plan to sell
  • When you’re looking at buying your next property

While a mortgage rate plays a part in how much your monthly mortgage payment will be, it’s also important to consider the total cost of borrowing over the lifetime of your mortgage and any potential penalty fees.

When you sign up with Perch, you’ll get access to a dedicated mortgage advisor who can help you decide what’s most important and recommend a mortgage that’s the right fit.

Should I get a fixed or variable mortgage rate?

The right option for you will be a mixture of personal preference and the current economic environment, since lender offers can change as often as each day and the value of each option can differ. When you open an account with Perch, our tools help break down the economic value of either option and you’ll also be able to consult your dedicated mortgage advisor to come up with a strategy that’s right for you.

Do I get a lower mortgage rate with a higher down payment?

If you’re like most people, you’ve likely assumed that by paying a higher down payment on your home purchase, it would translate into a lower mortgage rate. Unfortunately (or fortunately, depending on how much money you were planning to put down), this isn’t always the case.

If your down payment is less than 20%, it is mandatory for you to get mortgage default insurance. Mortgage default insurance is often referred to as CMHC insurance. Since you paid for your own insurance premium with a down payment , the lender doesn’t need to buy it on your behalf.

If your down payment is 20% or more, you do not need to get mortgage default insurance or CMHC insurance. However, this means the lender then has to pay for your mortgage default insurance premium on their end and they charge for it through a higher rate to offset it. The higher your down payment, the lower the default insurance premium and typically by the time you have 35% down payment or more, your rate would be essentially the same as if you had less than 20% down.

The lender has minimal risk under either scenario (5% down or 20% down) because all of these loans have mortgage default insurance. The only difference is who pays for either pay or don’t pay for that premium, which is why rates fluctuate as a result.

How do I lower my mortgage rate?

Mortgage rates are largely determined by bond markets and major financial institutions, however there are some ways you can influence the rates that lenders will offer you personally.

Improve your credit score
Higher credit scores usually result in more favourable lending terms for borrowers, which could mean a smaller monthly payment and lower interest costs. A low credit score (less than 600) will result in higher mortgage rates and you will not be eligible for an insured mortgage (a mortgage where you can provide as little as 5% down payment), which means you will be required to have at least 20% down payment.

Shop for the best rate

The Canadian mortgage space is competitive and one of the ways to attract new customers is by offering low rates. Lenders will often try to outdo each other with the rates they offer so it’s a great way to take advantage by comparing and shopping around for rates from different lenders.

You might be able to refinance your loan and reduce the amount of interest you’re paying if you currently have a mortgage and are seeking a little rate relief.

Once your loan term is up, you have the option of refinancing, or renegotiating your loan. Although you can refinance in the middle of your term, doing so means that you’ll have to break your mortgage, which could result in costly penalties.

Work with a mortgage broker
Experienced mortgage brokers will have access to several lenders and can help you find the right mortgage with a great rate. They will also help you negotiate a better deal on your behalf.

What are the factors that impact the mortgage rates I’m offered in Canada?

For most people, getting a mortgage will mean borrowing a significant amount of money and paying it back over a long period of time. Over that period, otherwise known as the amortization, you’ll be paying a lot of interest on that loan. Even the difference of a small fraction of a percentage point, also referred to as a basis point, can have a big impact on the amount of money you’ll pay over the lifetime of your mortgage.

Some factors that will personally affect the mortgage rates you’ll be offered compared to someone else:

  • Your credit score, which provides insight into the likelihood of you paying the mortgage loan
  • Whether you choose a fixed or variable rate
  • The length of your mortgage term
  • The amount of equity (or down payment on a purchase) you have in your home
  • If the property is a rental or not
  • The lenders you work with. Typically, big banks charge more than other lenders

There are many other factors, which your mortgage advisor can go over in more detail with you.

How often do mortgage rates change?

Mortgage rates are updated daily, from Monday to Friday, not including holidays. While the rates are updated daily, that doesn’t necessarily mean the rates will change each day.

Why do mortgage rates change?

Each rate type is directly attributed to different indexes, but are generally influenced by the same thing: The Canadian macroeconomic environment (jobs, economy, inflation, etc).

Variable/Adjustable Rates
The Bank of Canada is responsible for monetary policy, in other words, managing the supply of money circulating in the Canadian economy. They set what’s called the ‘target’ for the overnight rate, which is the interest rate that banks charge each other to cover their daily transactions. The target overnight rate affects what banks set as their prime lending rate. Variable rate mortgages are tied to the prime rate and typically quoted as Prime +/- a spread. So for example, the current prime rate is 2.45% and a Prime – 1% mortgage means your current rate would be 1.45%. Your spread will be locked in during your term (Prime -1%), but if the prime rate increases or decreases, your mortgage rate would increase or decrease as a result.

Fixed Rates
Fixed rate mortgages are typically a spread above Canadian bond yields, which is a largely referenced bond index used as a benchmark.

How do I view the mortgage rates I’m eligible for?

Shopping for a mortgage can be a frustrating and time-consuming process. Instead of calling around to multiple lenders or waiting for mortgage brokers to respond, you can quickly see your available mortgage offers in just a few clicks. These are real mortgage offers that would actually be available to you if you qualify, without having to submit a ton of information upfront.

Will I be able to get the lowest advertised mortgage rate?

Nothing is more frustrating than not being able to qualify for an advertised mortgage rate. Ads from banks can be misleading. We make it easy for you to instantly compare different mortgages between lenders, rates, different terms, and expected penalty fees. These are mortgages you could actually apply for when you sign up for a Perch account.

How do I lock in a mortgage rate in Canada?

When you see a mortgage offer you like, we encourage you to sign up for a Perch account and follow the step-by-step instructions in our online platform to submit your mortgage application. Rates usually can be locked in up to 120 days in advance and your dedicated mortgage advisor will be available by phone or email, seven days a week, in case you need support or have questions about the mortgage application process.

How can you predict if mortgage rates will increase or decrease?

We use data modeling to compare the expected fixed/variable rate against the current rate to determine where rates will move. Lenders typically lag macroeconomic events, so we can identify temporary pricing opportunities.

Do mortgage rates vary by province?

Yes they do. Lenders don’t charge different rates based on the province you’re in, but the number of lenders operating in your province and larger mortgage balances (due to higher home prices) will affect your mortgage rate.

Provinces with the most lenders have the most competition, and as a result, usually offer the lowest rates. Ontario, British Columbia and Alberta have the most active lenders and Quebec has the least. As a result, on average Quebec mortgage rates are 0.15-0.25% higher than other provinces.

In cities with more expensive homes such as Toronto or Vancouver, the average mortgage balance will also be higher. Higher mortgage balances typically also have lower mortgage rates. If you think about it from the lender’s perspective, it’s more efficient this way. It’s roughly the same amount of work to underwrite a $200,000 mortgage and a $1,000,000 mortgage, but your staff need to underwrite five $200,000 mortgages to equate to one $1,000,000 mortgage. If you need less staff to do the same amount of volume, you can save on overhead and pass that back to consumers through lower rates.

Your success is our success. Our clients trust Perch to get them the best mortgage rates.​

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