I don’t think anyone could wish for a better holiday gift than falling mortgage rates!  Although your kids may disagree. From October 2021 until to October 2023, we saw perhaps the largest displays of rate increasing madness we’ve ever seen. The lowest 5 year fixed rate for an insured mortgage shot from 1.59%, all the way up to 5.59% at its peak in late October this year.  

But what goes up must come down!   

So, when the big man comes down the chimney this Monday, December 25th, we can expect him to have his sack stuffed with lower fixed mortgage rates for everyone.  

 

Significant Cuts to Fixed Mortgage Rates 

Since early November, we’ve seen 5 year fixed rates fall from 5.59% to 4.89% for an insured mortgage. That’s a whopping 0.70% drop in only six weeks. 3 year fixed rates for an insured mortgage have dropped by a similar margin, falling from 5.89% down to 5.24%.  

As we jingle our way into 2024, bond yields continue to decline, building on the expectation of even lower mortgage rates to come. While rates are expected to drop, we must remember that what’s expected does not always become reality. While it’s looking promising, we can’t forget to keep a watchful eye out for The Grinch… AKA high inflation.  

 

A Disappointing Inflation Surprise 

In the CPI inflation report released yesterday, December 19th, economists were expecting inflation to fall to 2.9%. Much to everyone’s disappointment, it came in at 3.1%. The bond market could have reacted with a large spike, but fortunately, yields were up just marginally.   

And much to the disappointment of The Grinch, they were down by more than 2% today, which is a great sign.  

It has always been understood that the path to the Bank of Canada’s inflation target of 2% would not be a straight line, and that there would be some bumps along the road. Especially in this latter half of 2023. So, despite the inflation blip, things are still looking promising for mortgage rates going into 2024.  

Although… The Grinch has a reputation for tenacity and may still have some tricks up his sleeve.  

 

Conclusion

Despite yesterday’s sticky inflation report, optimism of mortgage rates falling throughout 2024 continues. But amid all the holiday cheer, lurking just beyond the warm glow of the fireplace will be The Grinch, eager to snatch away the joy brought by falling mortgage rates. However, if the classic cinematic tale – yes, the one graced by the great Jim Carrey – has taught us anything, it’s that The Grinch’s schemes are often foiled. As we wrap up 2023, the future looks bright and sparkling in the world of mortgage rates… but we just can’t forget that The Grinch hasn’t lost just yet.  

Happy Holiday’s to all, and to all a good night!