As we enter the fourth quarter of 2024, mortgage rates continue to fall. Fixed mortgage rates have already fallen by greater than 1.75% since they hit their peak in October 2023. At that time, most mortgage rates were in the high 5% to mid-6% range. Today, fixed mortgage rates range from 4.04% to 4.44% depending on your situation. This is the lowest they have been in more than two years. 

The Bank of Canada has already dropped their rate by 0.75% with more cuts expected. The next scheduled rate announcement is set for October 23rd, and many experts are expecting a 0.50% cut totaling 1.25% to date. If this cut becomes reality, it would be the first oversized cut in the current, downward trend. 

It’s now looking like the Bank of Canada will be dropping their rate faster than expected. Not necessarily cutting more… but faster. 

 

Deep Cuts Coming from the Bank of Canada

Now that the Bank of Canada has reached its 2.00% inflation goal roughly a year ahead of schedule, they can now shift their focus recession prevention. They will accomplish this by stimulating the economy with potentially more aggressive rate cuts. There are now some economists who are forecasting as much as another 2.00% in cuts* by the end of next spring. If they are right, then this would bring the prime rate down to 4.45%. 

But will they be right? 

No one is clairvoyant and everything is speculation. Forecasts are educated predictions which can and do change.  Sometimes they will change in our favour and sometimes not. While no one knows for sure, the current outlook seems to be a positive one.

 

Fixed Rate Mortgages 

As I continually say, while fixed mortgage rates are expected to fall further, a 2.00% cut from the Bank of Canada does not mean that fixed rates will also drop by 2.00%. At the start of this blog, I mentioned that fixed rates have already fallen by more than 1.75% compared to only 0.75% in cuts from the Bank of Canada. 

As of now, the lowest 3-year fixed rate for an insured mortgage on a purchase has fallen to 4.09%. It’s just a matter of time before this is into the 3% range. 

 

Variable Rate Mortgages 

Given that prime rate increased substantially more than expected in 2022 and 2023, many are gun shy when it comes to taking a chance on a variable rate in today’s market. While variable rate mortgages historically win out over fixed from a cost saving perspective in most markets, the risk of coming out behind is always present. This the risk involved with choosing a variable rate. 

If we compare today’s lowest 3-year fixed rate at 4.09% for an insured purchase with the lowest comparable variable at prime -1.25% (currently 5.20%), we’re looking at a spread of 1.11%. If we do in fact see prime rate cuts of 2.00% by summer, then you could come out nicely by choosing variable. But there is no guarantee that it will happen. As always, there is also no guarantee that the prime rate won’t increase before the end of the term. In fact, it likely will at some point. This is the risk involved with choosing a variable rate mortgage which is why it’s not for everyone. 

If you’re considering a variable rate, then I would highly recommend my blog on the Ultimate Guide to Choosing a Variable Rate Mortgage. 

 

Should You Wait Before Locking in a Rate? 

This depends on your situation. If your closing date is further out, it might be worth waiting while we monitor the market for you. But for faster closings—within 60 days—I’d recommend locking in a rate now.

But if rates are dropping, why would you want to lock in a rate now? 

Because today’s rate isn’t necessarily your final rate, and chances are that it won’t be. Even when rates are trending downward, there can and will be fixed rate increases along the way. Sometimes lenders will have special promos which they can revoke at any time… and waiting could mean losing out on a lower rate promo. 

Locking in a rate doesn’t mean you’re stuck with it. We’ll continue to monitor the rates for you, right up until your closing date. We can often get your rate dropped right up until a week before… even tighter. Either way, we’re always trying for you. Even if you have already signed, we can still get your rate dropped… or even move you to another lender if it means you’ll come out ahead. 

This is one of the big benefits of working with PMT. We’ll do the shopping for you, so you don’t have to. Not only are you saving on rate… but saving on time as well. 

 

Final Thoughts 

After the highly stressful rate increasing madness we saw in 2022 and 2023, it’s nice to be in the middle of the trend back downward. As mortgage rates fall, those sitting on the sidelines will soon be jumping back into the real estate market which would then become hot once again. This is what we’ve been waiting for. If you’re considering buying a new home, this seems to be the window of opportunity before all the craziness starts once again. If you’re waiting for mortgage rates to fall further, then I would highly recommend reading my blog on The Trap of Waiting for Lower Rates to Buy a New Home. 

Mortgage rates will continue to fall leaving us with one question.  Just how low will they get? Only time will tell. 

 

*Source: CIBC Economics