When Variable Rates Are Higher Than 5 Year Fixed Rates; Expect Interest Rate Drop

interest rates 2024
I thought you would appreciate this email that was sent to me by one of my mortgage brokers.  If you are looking to buy or refinance, the following should give you insights to bank expectations on rates.  I have already posted (last month blog) about how rates are expected to drop over the next two years by up to 3%.  Banks want you to lock in on the 5 year rates now which is why they are lower than variable rates.  


The Bank of Canada held their benchmark interest rate this morning at 5.00% for the second consecutive time ( Sept 6th ). Many economists had predicted this hold leading up to the announcement. Prior to that we saw 10 rate increases in the 12 meetings dating back to March 2022. Inflation numbers dropped to 3.80% in September, down from 4.00% in August. The central bank had hopes of having inflation down to the 3% by this time, with the overall goal being 2%.

This second straight hold is a much welcomed relief for those with a variable rate mortgage while the central bank will continue for some lag to see if inflation can stay in line or reduce without a rate hike.

They said this morning, "In Canada, there is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures". "CPI inflation is expected to average about 3½% through the middle of next year before gradually easing to 2% in 2025. "With clearer signs that monetary policy is moderating spending and relieving price pressures, Governing Council decided to hold the policy rate and to continue to normalize the Bank’s balance sheet. However, Governing Council is concerned that progress towards price stability is slow and inflationary risks have increased, and is prepared to raise the policy rate further if needed."

While they will always leave the door open in writing for a future rate hike, If we see continued downward inflation trends, we should see rates come down as we get to the 2% range.

Top 5 things to know:

1. Rates will come down when inflation comes down; they are projecting inflation to stabilize thru 2024 and get to their target in 2025. Economists are suggesting we may see they start to come down mid-to-late 2024.
2. Inflation was at 8% in the summer of 2022, we have made a lot of progress
3. With market prices having come down, we are still seeing activity as clients have rate holds in place and are taking shorter term mortgages. Many are seeing a price opportunity and confidence in rates being lower when they renew their mortgages.
4. Remember that the amortization on a mortgage is 30 years. A 3-year term at these rates still leaves 27 more years of mortgage to pay at potentially lower rates.
5. We have not seen or heard of any uptick in "distress" sales for those with variable rate mortgages. Clients are managing to make their payments, or many with static payment variable mortgages ( all big banks aside from Scotia ) will have decisions to make at renewal time - mainly in 2025/2026.

The next rate announcement will be December 6th, 2023.

You can read the full Bank of Canada release here.


The prime lending rate will remain at 7.20% at most lenders. Note, TD has a different prime that will stay at 7.35% - it's complicated!

On the fixed rate side, we have seen bond yield rise since the September announcement which has led to increases to fixed rates.

While most of our clients have been choosing to go with a 3-year fixed rate mortgages for most of the year, we have seen more interest in variable rates as we are likely at the peak of rates. I do see that trend to continue after the announcement today and even more if there is another hold in December. We have seen some take a more secure approach with 4 or 5-year terms and there are strategies we do suggest to our clients if taking these longer terms that can benefit them.

Mortgage rates/payments today will be approximately like this for owner occupied properties - I am just using very general rates, some lenders may have promo specials. 

Variable ( insured - less than 20% down ) - 6.30%. Works out to about $657/ $100,000 mortgage on a 25 year Amortization which is the max for insured. 

Variable ( uninsured - 20% or more down ) – 6.90%. Works out to about $652/ $100,000 mortgage on a 30 year Amortization which is the max for uninsured. 

5 year Fixed ( insured - less than 20% down ) – 5.49%. Works out to about $610/ $100,000 mortgage on a 25 year Amortization which is the max for insured. 

5 year Fixed ( uninsured - 20% or more down ) - 6.09%. Works out to about $600/ $100,000 mortgage on a 30 year Amortization which is the max for uninsured. 

3 year Fixed ( insured - less than 20% down ) – 6.39%. Works out to about $663/ $100,000 mortgage on a 25 year Amortization which is the max for insured. 

3 year Fixed ( uninsured - 20% or more down ) - 6.39%. Works out to about $619/ $100,000 mortgage on a 30 year Amortization which is the max for uninsured. 

Our current turnaround times:
Pre-approvals - live verbal pre-qualification on the client call; 1 business day for formal pre-approval
Approvals - upon an accepted offer, mortgage approval within 4 to 24 hours depending on the lender.

If you need help with any of your real estate financing, mortgage or renewals please let me know and I will hook you up with an amazing mortgage broker.  FYI, most of the time, there you pay no fee for their help as they receive payment from different lending institutions.