top of page

What mortgage holders need to know about the Bank of Canada rate hold

Canadian homeowners are undoubtedly feeling the effects of the recent surge in interest rates, a trend that real estate experts suggest has significant implications for mortgage holders. Despite the Bank of Canada's decision to maintain its key policy rate at five percent for the fourth consecutive meeting, marking the highest level in 22 years, the impact on mortgage payments for those with variable or fixed products might not be as straightforward as it seems.

Daniel Vyner, principal broker at DV Capital, emphasized that while a rate hold is preferable to a rate hike, it still carries weight, particularly for individuals who entered the real estate market with budgeting considerations based on lower rates. Vyner warned that the effects of a Bank of Canada rate hold in the current elevated interest rate environment should not be underestimated, as it can pose challenges for homeownership plans and monthly mortgage budgets.

Victor Tran, a real estate expert from Ratesdotca, pointed out that individuals with lending products tied to prime rates, such as variable rate mortgages or lines of credit, will experience no immediate impact due to the recent rate hold. For those holding variable rate mortgages, Tran assured that their payments would remain unchanged, offering some relief in the short term.

Despite the immediate reprieve, industry experts like Vyner predict that the looming renewals for fixed-rate mortgage holders will eventually bring about payment hikes. Alana Riley, head of insurance mortgages and banking solutions at IG Wealth Management, emphasized that elevated interest rates continue to place a burden on household cash flow, affecting Canadians with variable-rate mortgages, home equity lines of credit (HELOCs), and unsecured lines of credit.

James Laird, co-CEO of and president of CanWise mortgage lender, echoed these sentiments, expressing disappointment among mortgage owners with variable-rate products who were hoping for hints about the timing of the first rate cut.

Tran noted that first-time homebuyers often gravitate towards fixed-rate mortgage products for their perceived certainty and stability, providing a predictable monthly payment. However, with the hope of interest rates declining later in the year, some individuals approaching renewals may favor variable products, anticipating lower rates in the future compared to current fixed rates.

Vyner observed a shift in sentiment towards variable rate mortgages in the current environment, with some individuals showing a preference for shorter-term fixed mortgages. The belief among many is that variable products may outperform mid to long-term fixed-rate mortgages in the current economic landscape.

In conclusion, while the recent Bank of Canada rate hold brings temporary relief for variable rate mortgage holders, the overall impact of elevated interest rates continues to cast a shadow over the housing market. As homeowners navigate these uncertain times, careful consideration of mortgage options and potential future rate changes is crucial to ensure financial stability in the long run.