More than half of Canadian mortgages are set to renew before the end of 2026. With the Bank of Canada reducing its key interest rate from 5.0% to 4.75% on June 5th, many homeowners are now contemplating whether to choose a fixed or variable rate upon renewal. Understanding the available options and anticipating changes is crucial to effectively managing today's dynamic mortgage landscape.

Current Situation

During the pandemic real estate boom, variable rates were historically lower, but this trend has reversed recently. Currently, the average five-year variable interest rate offered by mortgage lenders is around 6.7%, while fixed rates are typically at 5.6%. Variable mortgage rates depend on various economic factors, including the key overnight lending rate set by the Bank of Canada. Although the central bank recently cut its key rate for the first time in four years, it could change course if inflation rises in the coming months. Economists expect further cuts by the end of 2024, continuing into 2025 unless economic conditions shift significantly. Despite declining rates, the historically low rates of the past two decades are no longer expected.

Considerations for Variable Rates

For variable-rate mortgages, an increase in the prime rate, influenced by the Bank of Canada's overnight lending rate, leads to higher mortgage payments. However, variable loans with fixed-payment options keep monthly payments unchanged, adjusting the mortgage amortization period instead. This results in a smaller proportion of each payment going towards repaying the principal.

Understanding Your Needs

Choosing between a fixed- and variable-rate mortgage depends largely on the borrower's risk tolerance and personal situation. Variable rates fluctuate, so consider if your lifestyle can accommodate these changes. Even if interest rates begin to fall, numerous economic factors influence their direction throughout your mortgage term. The right mortgage product depends on your short- and medium-term situation. If you're in a period of transition (career change, separation, etc.), a fixed rate might offer more stability.

Strategic Options for Borrowers

• Fixed-Rate Mortgage with a Shorter Term: Amid economic uncertainty, many borrowers are opting for shorter-term fixed-rate mortgages (one, two, or three years). This approach allows borrowers to lock in predictable monthly payments without committing to the same rate long-term.
• Hybrid-Rate Mortgage: This option combines features of both variable and fixed rates — part of the mortgage has a fixed interest rate, and the other has a variable rate. This allows borrowers to benefit from both stability and potential rate decreases.
• Convertible Mortgage: This loan allows borrowers to convert a variable interest rate into a fixed-rate mortgage, or vice versa, before maturity. This flexibility helps adapt mortgage strategies to changing market conditions.

Consult a Professional

Ready to navigate your mortgage renewal with confidence? Contact us today! We can connect you with one of our trusted and experienced mortgage professionals who are ready to help you explore your options and find the best solution tailored to your needs. Whether you're considering a fixed or variable rate, they will provide personalized guidance to ensure you make an informed decision. 

Source: CBD

In May 2024, the Ottawa Real Estate Board (OREB) reported a total of 1,545 homes sold through the MLS® System, marking a 9.2% decrease compared to May 2023. This figure was 3.7% lower than the five-year average and 13.2% below the ten-year average for May. Year-to-date, home sales reached 5,673 units over the first five months of the year, reflecting a 5.2% increase from the same period in 2023.

OREB President Curtis Fillier noted that Ottawa's early spring market remained steady, with an increase in new listings indicating growing seller confidence. However, some sellers may have awaited the Bank of Canada's interest rate announcement before making decisions, as the first interest rate cut in four years occurred. Nevertheless, supply issues and high home prices persist as challenges despite positive economic indicators.

By the Numbers – Prices:

The MLS® Home Price Index (HPI) tracks price trends far more accurately than is possible using average or median price measures.

• The overall MLS® HPI composite benchmark price was $651,300 in May 2024, a marginal gain of 1.2% from May 2023.

  • The benchmark price for single-family homes was $736,000, up 1.1% on a year-over-year basis in May.

  • By comparison, the benchmark price for a townhouse/row unit was $517,500, up 2.1% compared to a year earlier.

  • The benchmark apartment price was $425,000, up 2.0% from year-ago levels.

• The average price of homes sold in May 2024 was $690,683 increasing 0.8% from May 2023. The more comprehensive year-to-date average price was $679,862, increasing by 1.8% from the first five months of 2023.

• The dollar volume of all home sales in May 2024 was $1.06 billion, down 8.5% from the same month in 2023.

OREB cautions that the average sale price can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The calculation of the average sale price is based on the total dollar volume of all properties sold. Prices will vary from neighbourhood to neighbourhood.

By the Numbers – Inventory & New Listings

• The number of new listings saw an increase of 26.2% from May 2023. There were 3,034 new residential listings in May 2024. New listings were 23.2% above the five-year average and 10.2% above the 10-year average for the month of May.

• Active residential listings numbered 3,552 units on the market at the end of May 2024, a gain of 59.4% from May 2023. Active listings were 72.2% above the five-year average and 2.9% below the 10-year average for the month of May.

• Months of inventory numbered 2.3 at the end of May 2024, up from 1.3 in May 2023. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity. 

After maintaining the overnight lending rate at a two-decade high of 5% for 11 months, the Bank of Canada has now reduced its policy rate. In its scheduled June announcement, Canada’s central bank lowered the target for the overnight rate by 25 basis points to 4.75%.

Despite inflation remaining slightly above the BoC’s target of 2%, the overall consumer price index has decreased over the past year, indicating a slowdown in core inflation which is expected to continue.

“Governing Council decided monetary policy no longer needs to be as restrictive and lowered the policy interest rate by 25 basis points to 4.75%,” said Tiff Macklem, Governor of the Bank of Canada, in a statement to reporters following the announcement. “We’ve come a long way in the fight against inflation. And our confidence that inflation will continue to move closer to the 2% target has increased over recent months. The considerable progress we’ve made to restore price stability is welcome news for Canadians.”

Impact on Canada’s Housing Market: With the anticipated interest rate cut now in effect, many rate-sensitive homebuyers are likely to see this as a cue to re-enter the housing market.

A recent Royal LePage survey conducted by Leger found that 51% of Canadians who had postponed their home buying plans in the past two years would return to the market once the Bank of Canada reduced its key lending rate. Specifically, 10% of respondents said a 25-basis-point drop would prompt them to re-enter the market, 18% would wait for a cut of 50 to 100 basis points, and 23% would need to see a cut of more than 100 basis points before resuming their search.

“The long-awaited cut to the overnight lending rate has arrived. The Bank of Canada held its key lending rate at 5% for the past 11 months, and it has been more than four years since the rate was last reduced,” commented Phil Soper, president and CEO of Royal LePage. “Our research shows that half of sidelined homebuyers in Canada plan to resume their home search once the bank rate starts to decline. This will likely spark activity and put upward pressure on home prices in the latter half of the year.”

The Bank of Canada will make its next announcement on Wednesday, July 24th.

The Canadian federal government revealed its 2024 budget on Tuesday, April 16th, unveiling a range of initiatives aimed at bolstering housing affordability for Canadians. Here's a breakdown of eight housing policies outlined in this year’s budget:

1. Canadian Renters’ Bill of Rights: With more Canadians renting for extended periods, measures were introduced to safeguard tenants and facilitate their transition to homeownership. This includes the creation of a national standard lease agreement and incentivizing landlords to disclose rental price history. Additionally, a Tenant Protection Fund with $15 million allocated over five years will offer legal support to tenants.

2. Funding for New Home Construction: Significant investment was pledged towards constructing new housing units. The Canada Builds initiative, alongside increased funding for the Apartment Construction Loan Program, aims to facilitate the creation of 30,000 new homes by 2031. Additional financial support was allocated to the Housing Accelerator Fund and the Canada Housing Infrastructure Fund.

3. Extended Mortgage Amortizations: First-time buyers of newly-constructed homes will have access to 30-year mortgage amortizations, effective August 1st. This move is expected to reduce monthly payments and ease the financial burden on homebuyers.

4. Amendments to the Home Buyers’ Plan: The RRSP withdrawal limit on the Home Buyers’ Plan was raised from $35,000 to $60,000, offering aspiring homeowners greater flexibility in accessing funds for down payments, for those first time buyers who have been able to afford RRSP savings.

5. Support for Single-Family Home Suites: A $409.6 million investment over four years was earmarked for the Canada Secondary Suite Loan Program, enabling homeowners to borrow up to $40,000 for the construction of secondary housing units.

6. Funding for Post-War Housing Catalog: The modernization of the post-war home design catalogue received $11.6 million in funding, facilitating the development of standardized blueprints for various housing types.

7. Conversion of Public Lands into Housing: To address land scarcity, plans were announced to utilize public lands for housing development. The Public Lands for Homes Plan aims to build 250,000 new homes by 2031, with measures to reduce capital costs and repurpose federal office buildings for residential use.

These policies are the Federal Government's attempt to address housing affordability challenges and fostering sustainable housing development across Canada. While the efficacy of these changes remains to be seen, it appears that this is only the beginning based on the policies introduced over the last several months.

The past two years saw 51% of Canadians delaying their home buying plans, responding to the rise in borrowing costs. This surge led to a significant reassessment of intentions among millions of Canadians. Since March 2022, when the Bank of Canada began raising its key lending rate, over a quarter of the adult population (27%) actively participated in the housing market. However, more than half of them (56%) postponed their property search due to escalating interest rates, according to a recent survey by Royal LePage and Leger.

As inflation inches closer to the desired 2% target, expectations are high for the Bank of Canada to make its first cut to the overnight lending rate later this year. This anticipated reduction is poised to bring relief to variable-rate mortgage holders and those who deferred their home buying plans. Among those who delayed their purchase, 51% are ready to resume their search if interest rates drop. Specifically, 10% await a mere 25-basis-point drop, 18% anticipate a cut of 50 to 100 basis points, while 23% seek more than a 100-basis-point reduction before reconsidering their search.

Though 20% of sidelined buyers have abandoned their plans altogether, another 12% are poised to re-enter the market if the Bank of Canada's key lending rate remains steady. Among those aiming to re-enter once rates decrease, 44% prefer a four-year or five-year fixed-rate mortgage, the most favoured mortgage type and term in Canada. This number doubles the respondents intending to opt for a variable-rate mortgage (22%), while another 12% plan to secure a short-term fixed-rate mortgage.

Despite the challenges posed by rising interest rates, 65% of respondents remain actively engaged in the home buying process. This engagement spans from casual browsing of listings (39%) to continuing to save for a down payment (19%), applying for a mortgage pre-approval (12%), or already having obtained one (7%). However, 26% of respondents have temporarily disengaged from the home shopping process.

Ready to make your move in the housing market? Don't let rising interest rates hold you back! Whether you're ready to buy, actively browsing listings, or just considering your options, now is the time to stay informed and prepared. Let's take the next step together!

Early signs of a vibrant spring real estate market are evident in Ottawa's MLS® data. In March 2024, the Ottawa Real Estate Board recorded 1,165 home sales, marking a 10% increase from the same period last year. However, despite this surge, sales remained 21.5% below the five-year average and 15% below the ten-year average for March.

Year-to-date figures also depict a positive trend, with 2,678 homes sold in the first three months of 2024, reflecting a 13.1% increase from the corresponding period in 2023. Curtis Fillier, President of OREB, highlights the overall health of Ottawa's real estate market, anticipating an active spring and summer. Fillier notes the growing confidence among sellers, as indicated by the rise in new and active listings, coupled with increased showing activity. However, he observes a cautious approach from buyers, likely due to concerns regarding affordability and limited supply.

Fillier suggests a shift is imminent in the market dynamics, driven by post-pandemic adjustments in housing needs. This includes trends such as downsizing, urban migration, and seeking properties better suited to evolving requirements. Consequently, there's mounting pressure on the mid-range property market in Ottawa, which traditionally faces tight inventory levels. Fillier advises both buyers and sellers not to delay their decisions in this evolving market landscape.

In terms of pricing, the MLS® Home Price Index (HPI) reveals consistent growth. The composite benchmark price reached $636,700 in March 2024, reflecting a 2.7% increase year-over-year. Single-family homes saw a benchmark price rise of 2.6%, reaching $719,000, while townhouse/row units and apartments experienced modest gains as well.

The average price of homes sold in March 2024 was $682,078, up 5.1% from the previous year, with the year-to-date average price showing a 3.2% increase. Overall, the dollar volume of home sales in March 2024 surged by 15.6% compared to the same month in 2023.

In terms of inventory and new listings, March 2024 witnessed a 13.5% increase in new residential listings compared to March 2023, totalling 2,074 new listings. However, this figure remained slightly below the five-year average and significantly lower than the ten-year average for March. Active residential listings also rose by 18.3% year-over-year, with 2,543 units on the market by the end of March 2024. Despite this increase, months of inventory only saw a slight uptick, indicating a persistent imbalance between supply and demand in the Ottawa real estate market.

Take Charge of Your Real Estate Journey Today!

Whether you're looking to buy or sell in Ottawa's dynamic market, now is the time to act. Don't wait on the sidelines as opportunities unfold and market conditions evolve. Reach out and we can guide you through every step of the process. Seize the moment and make your move in Ottawa's buzzing real estate scene!

The Bank of Canada has opted to maintain its overnight lending rate at 5% for the fifth consecutive occasion, as announced in its scheduled interest rate declaration on March 6th. It affirmed its commitment to keep the policy rate steady at 5% and to continue the process of normalizing the Bank’s balance sheet.

Despite a drop in the annual inflation rate to 2.9% in January, the Bank cited underlying inflationary factors like shelter costs as grounds for maintaining the current interest rate level. It expressed the desire to witness further easing of inflation and the establishment of price stability before considering rate adjustments.

Economists anticipate potential rate reductions later in the year, possibly in the June announcement, should inflation continue to decrease toward the central bank’s target of 2%. The Bank of Canada's next announcement is scheduled for April 10th, 2024.

Today, the Bank maintained its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%, while also continuing its policy of quantitative tightening.

The global economic landscape saw a slowdown in growth in the fourth quarter, with the US experiencing a slight deceleration but maintaining robust and broad-based GDP growth. Meanwhile, the euro area's economic growth remained stagnant after a contraction in the third quarter. Inflation in both the US and the euro area continued to ease, while bond yields rose and corporate credit spreads narrowed. Equity markets showed strong gains, and global oil prices were slightly higher than previously projected.

In Canada, fourth-quarter GDP growth exceeded expectations, driven by exports, although overall economic growth remained below potential. Despite a modest increase in consumption, final domestic demand contracted, primarily due to a significant decline in business investment. Employment growth continued to lag behind population growth, and there were indications of easing wage pressures. Overall, the data suggest an economy operating with modest excess supply.

CPI inflation eased to 2.9% in January, mainly due to a moderation in goods price inflation. However, shelter price inflation remained elevated and remained the primary contributor to overall inflation. Underlying inflationary pressures persisted, with year-over-year and three-month measures of core inflation remaining in the 3% to 3.5% range. Although the proportion of CPI components growing above 3% declined, it remained above historical averages. The Bank anticipates inflation to stay close to 3% during the first half of the year before gradually easing.

The Governing Council's decision to maintain the policy rate at 5% and continue the normalization of the Bank’s balance sheet reflects concerns about inflation risks, particularly regarding the persistence of underlying inflation. The Council aims to witness further and sustained easing in core inflation while focusing on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior. The Bank remains steadfast in its commitment to restoring price stability for Canadians.

In February 2024, the Ottawa Real Estate Board reported a total of 886 homes sold through the MLS® System, marking a notable 15.2% increase compared to the same month in 2023. However, these sales figures fell 13.8% below the five-year average and 5.7% below the 10-year average for February.

OREB President Curtis Fillier emphasized the robust and active nature of the Ottawa real estate market despite higher prices and stable interest rates. Metrics across various indicators showed positive growth from the previous year, indicating significant activity among both buyers and sellers. Fillier, however, acknowledged the ongoing affordability challenges, with many individuals still unable to participate in the market.

The recent report from the Municipal Property Assessment Corporation (MPAC) revealed a scarcity of communities with homes under $500,000. A decade ago, 74% of Ontario residential properties had a value estimate below $500,000, but this has dwindled to only 19% today. Fillier advocated for impactful measures, such as allowing four residential units on property lots and eliminating exclusionary zoning, to address the lack of affordable housing.

Examining price trends, the MLS® Home Price Index (HPI) showcased a 2.8% increase in the overall composite benchmark price to $628,500 in February 2024 compared to the previous year. The benchmark prices for single-family homes, townhouses/row units, and apartments also exhibited varying gains. The average home price for February 2024 was $651,340, showing a 2% uptick from the same month in 2023. The dollar volume of all home sales surged by 17.5%, reaching $577 million in February 2024.

OREB cautioned against relying solely on the average sale price as an indicator of specific property value changes, emphasizing the variability across different neighbourhoods.

In terms of inventory and new listings, February 2024 witnessed a substantial 29.5% increase in new residential listings, totalling 1,539. Although these new listings were 10.3% above the five-year average, they remained 3.3% below the 10-year average for February. Active residential listings at the end of February 2024 numbered 2,158, marking a 16.3% gain from the same month in 2023. However, they were 59.6% above the five-year average and 17.7% below the 10-year average for February. The months of inventory stood at 2.4, remaining unchanged from February 2023, indicating the time it would take to sell current inventories at the existing rate of sales activity.

In January 2024, the Ottawa Real Estate Board reported a total of 629 homes sold through the MLS® System, marking a 16.5% increase compared to January 2023. Despite this positive trend, home sales were 10.7% below the five-year average and 3.9% below the 10-year average for the month.

OREB President Curtis Fillier noted that while there is increased showing activity, the market remains relatively quiet compared to pre-pandemic standards. Buyers are cautiously approaching the market, taking advantage of the slower pace to find their ideal property. Fillier advised sellers to adjust their expectations and carefully consider pricing and timing strategies with guidance from their REALTOR®.

Brandon Reay, OREB’s policy and external relations manager, emphasized the impact of low supply on market conditions. He advocated for meaningful policy changes, including streamlining processes at the Ontario Land Tribunal, eliminating exclusionary zoning, and permitting four units on residential lots to address the housing crisis.

On the pricing front, the MLS® Home Price Index (HPI) showed a 3.2% year-over-year gain in the overall composite benchmark price, reaching $621,600 in January 2024. Single-family homes saw a 3.7% increase to $703,500, while townhouse/row unit prices decreased by 2.1% to $462,200. The benchmark apartment price rose by 3.7% to $418,500. The average price of homes sold in January 2024 was $631,722, a 1.8% increase from the previous year.

The dollar volume of home sales in January 2024 amounted to $397.3 million, representing an 18.6% increase compared to the same month in 2023. OREB cautioned that while the average sale price is useful for tracking trends, it may not accurately reflect specific property values, which vary across neighborhoods.

Regarding inventory and new listings, there was a 7.3% increase in new residential listings in January 2024, totaling 1,271. Active residential listings at the end of the month numbered 1,961, reflecting a 4.5% increase from January 2023. Despite being 57.4% above the five-year average, active listings were 16.6% below the 10-year average for January. The months of inventory decreased from 3.5 in January 2023 to 3.1 in January 2024, indicating a measure of the time it would take to sell existing inventories at the current sales rate.