What's going on with mortgage rates in 2023?

Dan Eisner, TNM Founder and CEO, speculates on current market conditions and where rates may be headed.

With cliffhanger inflation readings, the economy is on the edge of its seat. Will the BoC continue to push rate hikes? Can we look to any relief in the coming months? Here's what I see.

Nov 24, 2023

Updated from November 21, 2023

ARTICLE CONTENTS

Policy rate held at 5.0%.

On October 25, 2023, the Bank of Canada held its rate steady again, keeping bank prime rates at 7.20% (not including variable-rate discounts that lenders like us may offer). Despite definite cooling across market indicators, it leaves the door open to another hike depending on inflation's progress to its 2.0% target.

Stay tuned for the next rate decision on December 6.


I spy rate drops on the horizon.

All the time, I'm asked about interest rates. That makes perfect sense. We've built True North Mortgage as the brokerage that offers access to the lowest mortgage rates around, with a simple, fast, client-focused service — and many of our competitors have tried to copy us ever since.

The Bank of Canada's (BoCs) trend-setting rate has increased by 4.75% since March 2022, the fastest rate-tightening cycle since the 1990s.

The signs of economic drag are mounting, from slowing spending to broad-based price decreases (core inflation is also inching down). The rate hikes may be over — with a drop finally within sight. When will fixed mortgage rates begin to ease?

Dan Eisner's Rate Prediction

We may have arrived at the 'intermission' phase between the Bank of Canada's monetary policy acts, hopefully moving on from the rate-tightening first act to anticipating the next major revelation — a policy rate decrease. Especially since October's headline and core inflation are both down to 3.1% and 3.6%, respectively. Housing costs (rents, mortgage interest, and property taxes) are still a significant inflation contributor.

The 'higher-for-longer' rate narrative has had more on-the-go revisions than an SNL skit. Economists and the central bank have had trouble seeing the future of rates, whether they need to keep going up — or when we can expect them to go down — because inflation, job markets, and consumer demand shunned the rapid rate increases for a time rather than folding them in.

But now, more household budgets and business spreadsheets are seeing the writing on the wall as high-rate havoc works to cool our economy.

In fact, the latest GDP (Gross Domestic Product) readings show that we may already be in the midst of a 'technical' recession if Q3 results bend to the negative (right now seeing a 0.1% retraction) that would join a negative Q2 result (a 0.2% contraction).

Are experts seeing an economic downturn coming? There's more pessimism about the outlook and coming numbers, which is why some are speculating out loud that we can't keep rates at this level for too much longer.

Spending is being ground down, debt arrears are increasing (mortgage arrears are still low, which may get worse as more homeowners renew into higher rates and payments in the coming months), GDP is projected to crawl the divide between recession and slight growth at best, and many (but not all) companies are trimming staff and budgets.

Global concerns (alongside our own government spending and record immigration) will continue to keep the central bank in pondering mode — its eye toward global conflict and oil price instability, China's weakened economy, and the performance of the Canadian dollar vs. the US greenback.

Time will tell whether we're stuck in a rerun of 'The One Where Inflation Isn't 2.0%' (the BoCs intended target) to keep rates elevated for longer than we'd all like, or the plot moves forward with the teaser, "Rate Drops Coming to a Mortgage Near You."

Will we see a rate hike on December 6? I think all the signs are pointing to the BoC leaving things alone. That doesn't mean it will drop its warning against further increases — stay tuned as we watch the economic readings leading up.

When will interest rates start to drop? I agree with economists already calling for the policy rate to begin falling around mid-2024. And I predict it will fall by 1.0% by the end of 2024. When (if) that happens, rates may take their time coming down to rest at a higher neutral rate of 3% (up from a projected 2.5%) — actualizing the 'higher for longer' mantra that will be on repeat for the next while and reminding Canadian consumers that the low, low rates days are firmly behind us.

Just think, a year from now, we could be looking at lower rates and better assessing the effects of this rapid rate-hike cycle, though we may not see the full impact for a couple more years.

"Keep in mind that predicting interest rates is a 50/50 game, but if we don't attempt to forecast, we can't help prepare or protect our mortgage clients."

What can affect BoC's rate decisions?

Our central bank really wants to see good news in the form of cooling numbers all around to convince it that another hike isn't needed:

  • Great newsOctober's inflation numbers dropped to 3.1% from September's 3.8 % (3.2% was expected); core inflation (no gas or food) declines to 3.6% y/y (next inflation reading Dec 19)
  • Better newsOctober saw +18K jobs added, but was offset by the number entering the workforce to notch the unemployment rate up to 5.7% (from Sept's 5.5%), back to the same level before the pandemic hit in March of 2020 (next reading Dec 1)
  • Better news – Average wage growth notched down to 4.8% in October from September's 5.0%, an encouraging sign trending in the right direction against entrenching inflation
  • Good newsAugust Canadian GDP (Gross Domestic Product) is flat again (vs. a 0.1% expected gain,) and advance Q2 numbers point to a 0.1% decline (Sept and Q2 numbers out Nov 30)
  • Nail-biting news – Canadian 5-year bond yields are on a tight rollercoaster, hovering between 3.7% and 3.9% (from an earlier high of 4.4%); projections on both sides of the border seeing a continued policy rate pause haven't yet set a decidedly downward yield trend

Did you know? CPI (Consumer Price Index) measures the monthly change in prices (from a fixed basket of goods and services) paid by Canadian consumers. It's the most widely-used measure of inflation.

When will fixed rates go down?

Fixed mortgage rates are steered by the Canadian bond market and (eventually) follow the movements in bond yields up or down.

Bond yields are hovering around 3.8% after reaching a high of 4.4% a few weeks ago, as markets react to a possible 'technical' recession in Canada and easing inflation, but with upside economic surprises here and there (such as higher-than-expected 0.8% September retail sales growth). The central bank is still pushing a 'higher for longer' rate projection to convince Canadian consumers to buckle down on spending.

Regardless, there's been a tangible change in the mood, looking to a continued policy rate hold — for how long is the real question. We're not entirely out of the woods — another rate hike isn't likely in 2023, but isn't ruled entirely out for early 2024 to tame inflation and inflation expectations.

Fixed mortgage rates have already started to drop a little and may continue if Canadian banks are confident in a show of a slowing economy, though they'll watch their costs as they hold more capital to deal with the potential for increasing debt arrears.

With the BoC's next rate decision on December 6, the bond market will likely be reacting to daily economic news in a tight range. If you're considering buying a home or renewing, getting a rate hold now could help protect you from any further increases (you'll still get a lower rate if they go down during your hold).

Fixed rates aren't usually as volatile as we've seen these past few months. Yields have been swinging like a weather vane in response to the next emerging factor (like job numbers, the inflation rate, oil price changes, or global developments) as the market tries to anticipate which direction the economic winds will blow.

For the rest of 2023? The 'higher for longer' rate mantra means that 5-year fixed rates won't log notable declines until the central bank signals that a drop in their policy rate is imminent. And experts aren't expecting that for a few months into 2024, unless those recessionary bells start ringing louder.

Make sure to get your best rate deal through one of our expert mortgage brokers to save more.

Fixed Mortgage Rate Watch: You can watch the fluctuations in 5-year bond yields in reaction to the latest economic news. For the most part, yields try to anticipate the inevitable: a soft landing or hard thud that will signal an about-face in the BoC's rate agenda.

Will financial antics in the U.S. affect rate hikes here?

If the U.S. economy also remains stubbornly resilient and the Federal Reserve hikes its rate before year-end, that could push a rate increase here at home. Recent spikes in long-term bond yields, however, place U.S. regional banks at risk once again and may do enough restrictive work to further dampen rate-hike expectations there.

Is a soft landing still in the cards?

The trajectory for a soft landing — meaning no recession or a very mild one, is experiencing some turbulence here in Canada. The 'extra' rate hikes this past summer may have created enough wind pockets for a bumpier economic ride.

The Bank of Canada refers to projected faring as 'low positive growth' that walks the line, likely dipping into negative territory, rather than calling it a 'recession' (Tiff Macklem, October 25 press conference).

There's still optimism that the market resilience up till now may actually work to keep our economy out of a major recession. Despite the BoC comments, experts are projecting a mild recession through the first half of 2024. Of course, any solid predictions can be quickly tossed around by a surprise in job market strength or a sustained level of consumer spending.

A bumpy landing may come with lowered mortgage rates.

The more impact these higher rates have going forward on unemployment and economic growth, the more quickly the BoC would back down on its policy rate, providing some budget relief when we'll likely need it most.

Stagflation isn't expected to stick a landing.

Stagflation, a period of high inflation together with a weak economy and high unemployment, is on everyone's radar. According to the BoC, "it's not where we are now" as our inflation isn't high enough, having come down to around 4% from over 8%, and unemployment is still relatively low historically, at 5.7% (October 2023 numbers).

Fact: A recession is technically considered an economic contraction reported for at least two financial quarters in a row, but typically a pronounced and persistent period of economic decline.

Will the mortgage stress test get harder?

In January 2023, OSFI (The Office of the Superintendent of Financial Institutions) proposed changes that would further tighten the required mortgage stress test and its rules.

It's now the 3rd quarter of 2023, and OSFI is imposing a rule on November 1 for re-advanceable home equity lines of credit, limiting how much borrowing room is opened up to a homeowner after their principal balance is drawn down (a maximum of 65% Loan-to-Value rather than the current 80% LTV allowed).

And big banks now have to hold more capital in reserve for their fixed-payment variable rate mortgages to account for clients' extended amortizations and potentially higher risk of default.

But there's been no 'discernible' action readied to increase the stress test to make mortgage qualification even harder. In fact, OSFI recently mentioned a 'known' rule that insured mortgages can be qualified using the contract rate and not the stress test. Since then, lenders have been tripping over themselves to add this qualification change to their mortgage approval process.

There's still a possibility that more tweaks may be coming at OSFI's year-end meeting in December. But it may consider the higher interest rates a limiting-enough measure for Canadians applying for a mortgage to keep banks protected.

Does True North anticipate mortgage activity to decline?

The higher rate environment has the housing markets in for cooling in sales and price growth, on top of a typical seasonal slowdown (until things are expected to pick up again next spring). Though with our access to great rates and products, we're still attracting many mortgagees who look to lower their monthly costs.

Despite the tepid activity projected, more sellers have moved into the listings (Alberta seems to be an exception), offering more choices for buyers who are looking or need to move.

But higher immigration, increased interest from first-time buyers perturbed by higher rents, and lower housing inventory available may still combine to keep a floor under prices in some regions.

Home buyers and owners hold on in 2023

Weathering these fast rate hikes hasn't been that easy for some of our clients (fortunately, many are still hanging on — we've helped many realign their mortgage budgets and needs). First-time home buyers especially need expert advice to set them on a path to successful homeownership amid higher rates.

Some Canadians are managing to adjust to rates as they are now, and trying to find the right rate and term at renewal to keep their financial goals on track.

Regardless, we want to see that home buyer conditions on purchase offers stay in 'vogue' (no mad resurgence of no-condition or bully offers, or fierce bidding wars), so Canadians can better protect themselves from financial surprises or setbacks.

Owning a home is a tremendous source of pride in Canada. I created True North to help clients appreciate having access to a better mortgage experience, saving them thousands with their best rate and mortgage choice.

Have questions about your mortgage or pre-approval? Give us a shout, anywhere you are in Canada. We have your best rate, expert advice and unbeatable service — with over 14,000 5-star reviews from our happy clients.

Dan Eisner
TNM Founder and CEO
More about Dan

As Founder and CEO of True North Mortgage, Dan is a mortgage industry innovator and an entrepreneurial machine, to say the least.

Talk to us. Save your money.

Historical Mortgage Rates

For British Columbia - Last Updated Nov 10 2023

5 Year Variable Rate

5.99% - 7.3%

  2023 (average)

5.72%

6.89%

  October

5.99%

7.30%

  September

5.99%

7.30%

  August

5.99%

7.30%

  July

6.00%

7.19%

  June

5.75%

6.85%

  May

5.50%

6.60%

  April

5.50%

6.60%

  March

5.50%

6.60%

  February

5.50%

6.60%

  January

5.50%

6.60%

  2022 (average)

2.94%

3.77%

  December

5.25%

6.28%

  November

4.75%

5.70%

  October

4.75%

5.70%

  September

4.25%

4.95%

  August

3.50%

4.45%

  July

3.50%

4.45%

  June

2.46%

3.39%

  May

1.95%

2.75%

  April

1.78%

2.50%

  March

1.13%

1.84%

  February

0.99%

1.65%

  January

0.99%

1.55%

  2021 (average)

1.14%

1.58%

  December

0.99%

1.55%

  November

0.90%

1.55%

  October

1.09%

1.55%

  September

1.09%

1.55%

  August

1.09%

1.55%

  July

1.09%

1.55%

  June

1.19%

1.55%

  May

1.19%

1.55%

  April

1.24%

1.55%

  March

1.24%

1.55%

  February

1.24%

1.65%

  January

1.29%

1.75%

  2020 (average)

1.90%

2.25%

  December

1.38%

1.79%

  November

1.55%

1.80%

  October

1.55%

1.90%

  September

1.61%

1.87%

  August

1.66%

2.00%

  July

1.79%

2.10%

  June

1.79%

2.10%

  May

1.95%

2.25%

  April

2.00%

2.43%

  March

2.25%

2.50%

  February

2.65%

3.10%

  January

2.65%

3.10%

  2019 (average)

2.68%

3.20%

  December

2.65%

3.10%

  November

2.65%

3.10%

  October

2.65%

3.10%

  September

2.65%

3.10%

  August

2.65%

3.10%

  July

2.65%

3.10%

  June

2.68%

3.10%

  May

2.70%

3.20%

  April

2.75%

3.20%

  March

2.75%

3.35%

  February

2.70%

3.45%

  January

2.65%

3.45%

  2018 (average)

2.35%

2.88%

  December

2.65%

3.35%

  November

2.65%

3.25%

  October

2.55%

2.90%

  September

2.40%

2.80%

  August

2.40%

2.80%

  July

2.40%

2.80%

  June

2.15%

2.60%

  May

2.21%

2.55%

  April

2.21%

2.85%

  March

2.21%

2.85%

  February

2.21%

2.85%

  January

2.21%

3.00%

  2017 (average)

1.89%

2.46%

  December

1.95%

2.75%

  November

1.95%

2.75%

  October

2.05%

2.75%

  September

2.15%

2.65%

  August

1.90%

2.50%

  July

1.95%

2.50%

  June

1.75%

2.25%

  May

1.75%

2.25%

  April

1.78%

2.25%

  March

1.80%

2.30%

  February

1.80%

2.30%

  January

1.90%

2.30%

  2016 (average)

2.02%

2.30%

  December

1.90%

2.30%

  November

1.90%

2.30%

  October

1.90%

2.30%

  September

1.95%

2.30%

  August

1.95%

2.30%

  July

1.95%

2.30%

  June

2.05%

2.30%

  May

2.10%

2.30%

  April

2.10%

2.30%

  March

2.10%

2.30%

  February

2.15%

2.30%

  January

2.15%

2.30%

  2015 (average)

1.98%

2.15%

  December

2.10%

2.20%

  November

2.05%

2.15%

  October

1.90%

2.05%

  September

1.90%

2.05%

  August

1.85%

2.05%

  July

1.90%

2.15%

  June

2.05%

2.15%

  May

2.00%

2.15%

  April

2.00%

2.15%

  March

2.00%

2.15%

  February

2.00%

2.25%

  January

1.95%

2.30%

  2014 (average)

2.30%

2.43%

  December

2.15%

2.35%

  November

2.15%

2.35%

  October

2.15%

2.35%

  September

2.25%

2.35%

  August

2.25%

2.35%

  July

2.30%

2.40%

  June

2.40%

2.50%

  May

2.40%

2.50%

  April

2.40%

2.50%

  March

2.40%

2.50%

  February

2.40%

2.50%

  January

2.40%

2.50%

5 Year Fixed Rate

5.24% - 6.89%

  2023 (average)

4.98%

6.22%

  October

5.62%

6.89%

  September

5.47%

6.89%

  August

5.37%

6.89%

  July

5.19%

6.39%

  June

4.92%

5.95%

  May

4.57%

5.84%

  April

4.84%

5.84%

  March

4.65%

5.84%

  February

4.67%

5.84%

  January

4.49%

5.84%

  2022 (average)

4.03%

4.82%

  December

4.69%

5.82%

  November

4.92%

5.74%

  October

5.01%

5.70%

  September

4.44%

5.54%

  August

4.34%

5.54%

  July

4.52%

5.54%

  June

4.37%

5.10%

  May

3.89%

4.66%

  April

3.72%

4.23%

  March

3.14%

3.64%

  February

2.74%

3.20%

  January

2.52%

3.07%

  2021 (average)

1.89%

2.43%

  December

2.39%

2.94%

  November

2.37%

2.91%

  October

2.12%

2.56%

  September

1.84%

2.39%

  August

1.79%

2.39%

  July

1.79%

2.39%

  June

1.79%

2.39%

  May

1.79%

2.39%

  April

1.89%

2.39%

  March

1.89%

2.32%

  February

1.62%

1.99%

  January

1.43%

1.99%

  2020 (average)

2.02%

2.43%

  December

1.49%

1.99%

  November

1.59%

1.99%

  October

1.59%

2.04%

  September

1.79%

2.04%

  August

1.79%

2.19%

  July

1.89%

2.39%

  June

1.99%

2.39%

  May

2.24%

2.59%

  April

2.44%

2.89%

  March

2.29%

2.84%

  February

2.44%

2.84%

  January

2.64%

2.99%

  2019 (average)

2.72%

3.09%

  December

2.39%

2.89%

  November

2.29%

2.94%

  October

2.54%

2.94%

  September

2.49%

2.84%

  August

2.39%

2.79%

  July

2.49%

2.84%

  June

2.59%

2.84%

  May

2.79%

3.09%

  April

2.89%

3.19%

  March

3.14%

3.39%

  February

3.34%

3.59%

  January

3.29%

3.72%

  2018 (average)

3.15%

3.62%

  December

3.39%

3.82%

  November

3.49%

3.84%

  October

3.19%

3.64%

  September

3.19%

3.67%

  August

3.19%

3.67%

  July

3.14%

3.64%

  June

3.14%

3.64%

  May

3.14%

3.64%

  April

2.99%

3.54%

  March

2.99%

3.54%

  February

3.09%

3.49%

  January

2.89%

3.34%

  2017 (average)

2.54%

2.87%

  December

2.79%

3.29%

  November

2.69%

3.29%

  October

2.84%

3.29%

  September

2.84%

3.20%

  August

2.59%

2.99%

  July

2.64%

2.69%

  June

2.39%

2.49%

  May

2.24%

2.49%

  April

2.29%

2.59%

  March

2.39%

2.74%

  February

2.39%

2.74%

  January

2.44%

2.69%

  2016 (average)

2.30%

2.56%

  December

2.44%

2.64%

  November

2.29%

2.39%

  October

2.14%

2.39%

  September

2.14%

2.49%

  August

2.24%

2.49%

  July

2.24%

2.49%

  June

2.24%

2.59%

  May

2.34%

2.59%

  April

2.34%

2.59%

  March

2.34%

2.69%

  February

2.39%

2.69%

  January

2.44%

2.69%

  2015 (average)

2.45%

2.65%

  December

2.54%

2.69%

  November

2.44%

2.69%

  October

2.29%

2.59%

  September

2.39%

2.59%

  August

2.39%

2.59%

  July

2.39%

2.59%

  June

2.44%

2.59%

  May

2.44%

2.59%

  April

2.44%

2.69%

  March

2.49%

2.69%

  February

2.59%

2.69%

  January

2.59%

2.79%

  2014 (average)

2.88%

3.02%

  December

2.74%

2.89%

  November

2.74%

2.89%

  October

2.74%

2.89%

  September

2.74%

2.89%

  August

2.74%

2.89%

  July

2.79%

2.99%

  June

2.94%

3.09%

  May

2.94%

3.09%

  April

2.94%

3.09%

  March

2.94%

3.09%

  February

3.09%

3.19%

  January

3.19%

3.29%