Mortgage Rates Dropping into 2024

The current mortgage rate environment in Canada is seeing bond yields decrease from their highs.  Recent action in the bond market has seen yields drop about 70 basis points from their highs of about 4.5%.  Translated to mortgage rates,  we’ve seen minor drops in the 5 year fixed so far as banks have not reduced mortgage rates in lockstep with bond yields falling. This is because banks and lenders have to hold more margin for risks in the market than usual. As time goes on in 2024 we should start to see some more reductions in the fixed mortgage rates side.

Later in 2024, the Bank of Canada is expected to reduce their lending rate which will lower bank prime rates. Inflation readings will be important in signalling when this may happen , along with any more GDP data regarding a potential recession. Current bank prime rate is sitting at 7.20% with the majority of lenders.  Some mortgage brokers in Toronto are offering variable rates at lenders up to 0.90% below prime or 6.30% currently. Borrowers are starting to favor variable rates for renewals and purchase or refinancing as they believe locking into higher fixed rates could be a mistake. This is because the belief is the prime rate could be around 1% lower at the end of 2024.

Fixed mortgage rates are currently at the higher end of the range over 6% and even over 7% for short term. Borrowers are looking at these rates versus variable rates and coming up with their own beliefs of which one may be a better choice into next year 2024. The trend is now starting to show that variable is getting much more interest than before as the Bank of Canada looks to cut rates sometime in the later half of 2024.

Competition among banks in Toronto is another vital factor influencing mortgage rates. With numerous financial institutions vying for customers, banks must stay competitive to attract borrowers. This competition can lead to lower mortgage rates as banks attempt to gain an edge over their rivals. However, it’s important to note that not all banks offer the same rates, as they may have varying strategies, cost structures, or risk appetites.

While these factors shape the mortgage rates in Toronto and the GTA, it’s important to note that individual borrowers’ creditworthiness also plays a significant role. Factors such as credit score, income, and down payment size can influence the rate offered by a lender. Those with higher credit scores and larger down payments typically pose lower risks to lenders, which may result in lower mortgage rates. Or in the case of mortgage refinancing in Toronto , borrowers with more equity and better credit scores are easier to approve.

In conclusion, mortgage rates in Toronto banks are influenced by various factors, including the Bank of Canada’s benchmark interest rate, economic conditions, inflation, competition among lenders, and individual borrower characteristics. Aspiring homeowners and buyers should closely monitor these factors and consider seeking professional advice to navigate the complex landscape of mortgage borrowing. By staying informed and proactive, borrowers can secure the most favorable mortgage rates in Toronto’s banking industry.