What's going on with mortgage rates in 2024?

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

Inflation has cooled, but will it get hung up on the way down? The BoC hasn't quite backed off its rate-hike rhetoric. When can we look to some rate relief? Here's what I see.

Feb 29, 2024

Updated from February 20, 2024

ARTICLE CONTENTS
Sticking around


BoC holds again at 5.0%

January 24, 2024 – The Bank of Canada sticks to no rate change (4th time in a row), leaving bank prime rates at 7.20% (not including variable-rate discounts that lenders like us may offer).

The central bank refrained from hinting at when rates might drop — but signalled the hikes may be over. Stay tuned for its next rate decision on March 6, 2024.


I spy rate drops on the horizon. But when?

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. (Read our 2023 Mortgage Rate Recap here.)

Inflation takes a big step down in January, though it may still face headwinds if economic growth revs up here and in the U.S.

Dan Eisner's Rate Prediction

Rate hikes seem to be in the economic rearview mirror (according to Bank of Canada comments), with the road ahead being scanned for signs of approaching rate drops (somewhere, over the rainbow).

Finally, there is a bit of good news on the inflation front: January's unexpected drop to 2.9% (from 3.4% in December) falls within the central bank's 1-3% target range. Stripping out shelter cost increases (like mortgage interest and rent) of 6.2% — the headline inflation needle drops to a cooled-engine level of 1.5%.

The core January inflation reading also cooled to 3.3% (from 3.9% last month), which is still above range but headed in the right direction. Yet, we need to keep in mind the recent pop-up economic surprises that can thwart rate-cut timing:

  • Elevated wage growth in December
  • A January notch-down in our unemployment rate to 5.7% (the wrong direction)
  • A robustly growing U.S economy despite higher interest rates, boosting Canada's January growth (so far)
  • A Canadian economic growth spurt of 0.4% thought possible for January 2024
  • Increasing government debt levels (federal and provincial), adding to inflationary pressures

Despite interest rates way up into restrictive territory (5.0% vs. a neutral rate of 2.5%-3.0%, where the economy happily chugs along at playground speed), the economy still shows signs of resistance.

It's bouncing expectations of how the economy is supposed to behave against these ratcheted rates and swinging rate-drop expectations anywhere from March to July. It reminds us there's no straight road to 'normal' rates.

To be sure, high rates are wreaking some havoc below the surface:

  • Many businesses are freezing their hiring, with some contemplating outright job cuts in the next 6 months
  • Over 40% of companies are seeing a decline in sales
  • Public sector hiring is stronger than non-public (business) hiring, which doesn't fuel growth
  • Non-mortgage debt arrears are increasing
  • A decline in domestic demand despite tepid growth in Q4, which is not encouraging alongside the strongest population growth Canada has seen in decades
  • Over 2M mortgage renewals are coming up in 2024 and 2025 to add further stress to household budgets

This March 2024 will mark two years from the first rate hike (March 2022). The hikes are taking their time. But they are working through our economy to hopefully bring rate relief soon despite the bumps in the road. Many experts have said that we can't keep rates at this level for too much longer, noting that the damage will eventually bubble up to the top — hopefully not in the form of extensive job losses and a recessionary stall.

The 'higher-for-longer' rate narrative has had more on-the-go revisions than a national winter road report. Time will tell whether we're stuck on a seemingly endless 'highway' (are we there yet?) or if we can soon take the next off-ramp to the town promoting lower rates.

What will happen at the next rate meeting on March 6? The central bank will likely continue to leave rates where they are as we wait for signs of impending rate declines.

I still predict mid-year timing for the first rate drop to appear. And I believe prime rates will fall by about 1.5% by this time next year — and continue in 2025 down another 0.50% (2.0% in total). Rate cuts may speed up if the economy slows down too quickly. But at the moment, economists project an eventual higher neutral-rate resting point of 3% (up from a projected 2.5%). The 'neutral rate' range will be a moving target over the coming months — we'll keep an eye on the numbers and update the total drop estimation as we go.

Is there a danger that the prime rate will move up instead? There's always that danger until inflation finally brakes to a comfortable pace. The Bank of Canada is still concerned about inflation's path. But it would be a rate 'notch,' not another round of skyrockets (been there, done that).

Just think, a year from now, we could be looking at lower rates, better assessing the impact of all these hikes, and wondering where the economy will go from there.

"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 wants to see good news in the form of cooling numbers all around to decide when to start its rate drop cycle:

  • Great newsJanuary's headline inflation numbers declined to a surprising 2.9% from last month's 3.4% (3.3% was expected); core inflation (no gas or food) also cooled to 3.2% (next inflation reading Mar 19)
  • Not the best newsJanuary added 37K jobs (mostly part-time) instead of the 10K expected, and the unemployment rate dropped to 5.7% from last month's 5.8%, the first decline since December 2022 (next reading Mar 8)
  • Mixed news – Average wage growth in January eased to 5.3% from 5.4%; it's still high compared to November's 4.8% and indicates entrenching inflation that can further impede decline (next reading Mar 8)
  • So-so news December's GDP stayed flat from November (good); Q4 2023 increased by 0.2% (0.3% was expected) and Q3 declined 0.1%; it looks like January growth jumped 0.4% (not good), and 2023 real GDP recorded +1.1%, the most tepid growth since 2016 (January actual numbers come Feb 29 and Q1 2024 on May 31)
  • Good news – Canadian 5-year bond yields have responded to January's lower Canadian inflation reading with a courtesy, bowing below 3.6%

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. See 2023 CPI readings here.

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. 5-year bond yields are the standard for setting 5-year fixed rates, and are the reference in this section and blog.

Surprise! Lower January inflation numbers have brought the 5-year bond yield below 3.6% — which will help ease the recent pressure on fixed mortgage rates.

Headline inflation coming in at a cooler 2.9% in January is almost the same as a tire leaking air. All the recent pressure on the central bank — in the form of stronger numbers that push against these higher interest rates — has now let up a bit. This tad of good news may be short-lived if Canadian job numbers and growth come in stronger over the next few months, with the Bank keeping a close eye on economic conditions south of the border.

The Bank of Canada has dropped its rate-tightening rhetoric but remains concerned about inflation, looking at all the at-home and world-round factors threatening deflation to its ultimate target of 2.0%. The bond yield market still believes that rate drops are coming, but with the recent scare-jumps, we're back to waiting on the edge of our seats for rates to retreat from such 'restrictive' territory.

Is this just another bump in the rate road? Bond yield volatility along the way is considered 'normal ' when prime-rate drops are anticipated. The bond market is particularly reactive to immediate factors or sentiment, triggering bond sell-offs in a snap and a fixed-rate rollercoaster (in a tight range) in response.

Look for fixed mortgage rates to trend sideways or downwards in the next while, as lenders closely watch their costs, retaining capital to deal with the potential for increasing debt arrears.

Get a rate hold now!

If you're considering buying a home or renewing sometime in the next few months — talk to one of our expert brokers to get a rate hold. It could protect you from rate volatility in that time, and you'll still get a lower rate if they go down during your hold.

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?

The U.S. economic landscape seems to be gaining greenery with each passing month instead of losing it — with a frothy jobs market and strong GDP. Regional banks, however, are still at risk thanks to commercial real estate woes (high renewal rates and depressed values due to lower occupancy). Whether inflation will be impacted in the next few months remains to be seen, with the U.S. Federal Reserve still banking on rate cuts before year-end.

Why do we care? Economic conditions south of the border can pile on factors weighed by our central bank (and drive higher prices here) to affect its rate decisions.

Will Canada see a recession?

Despite the constant, distant calls of the 'recession' loon, it hasn't flown into our backyard yet. That doesn't mean the trajectory for a soft landing — meaning no recession or a very mild one — is an absolute. Nothing is ever certain in love or economics.

Back in October 2023, the Bank of Canada referred to projected economic faring as 'low positive growth' that will walk the line and possibly dip into negative territory (but not as a full-blown 'recession'). So far, that's coming true, with a bit better faring on Q4 2023 GDP expected than initially forecast.

There's optimism that market resilience might keep our economy out of recessionary territory. Experts had projected a mild recession through the first half of 2024 — we're not out of the woods on that yet. Higher inflation or sustaining high rates for too long may jeopardize that soft landing or possibly end up in a crash landing.

A bumpy landing? It could bring lower mortgage rates sooner.

The more damage these higher rates inflict on unemployment and economic growth, the faster 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, at 5.7% (January 2024 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?

Here are the 2023 changes made by OSFI (The Office of the Superintendent of Financial Institutions):.

  • Big banks were instructed to hold more capital in reserve for their fixed-payment variable rate mortgages to account for increasing amortizations and risk of default.
  • October 2023 — Stress-test requirement was removed for eligible insured mortgage renewals (lender optional) to provide more flexibility in switching lenders for a better deal.
  • November 1, 2023 — Borrowing room limit imposed on re-advanceable home equity lines of credit — a maximum of 65% loan-to-value rather than the 80% LTV previously allowed.

For 2024, OSFI has pledged to keep its eye on lender (and homeowner) protections, not ruling out a stress test change. Any proposals it makes, implementation likely won't happen until Q2 or Q3, after it consults the industry.

  • This January, OSFI announced adjusting debt criteria for uninsured mortgages to protect lenders from overleveraged clients when mortgage rates decline. It wants to add another qualifying ratio (loan-to-income, LTI), which may lead to indebted clients paying even higher renewal rates. This rule would come without transparency, however, with each lender applying it with its own formula that it can't (legally) share with clients.

Does True North anticipate an increase in mortgage activity?

While the higher rate environment has dampened affordability, Canadian home buyers and owners are already starting to get busy ahead of a housing-market rush, expected to occur when prime rates ease off and variable rate discounts grow.

As always, we offer great rates and specials, and we're attracting many mortgagees who look to lower their monthly costs while taking advantage of housing deals in their area.

Despite warming activity, predictions are mixed on the effect lowering rates will have on housing prices. More sellers may list to get out of restrictive rates, yet the newcomer numbers may keep demand high. Both rates and home prices are elevated enough for some to consider putting their buying intentions off to next year when the mortgage stress test is lower (with lowered rates).

Our low 6-month and 1-year Rate Relief™ products can help you bridge the gap with budget relief now to hopefully renew into lower rates — enabling your dream-home buy sooner.

Read more here about how high mortgage rates may impact the 2024 housing market.

My mortgage advice for 2024? Shop for your best rate — and consider a variable one.

Around 2M Canadians are coming up for renewal in the next couple of years. Even if rates go down in 2024, homeowners will still take a budget hit from renewing at higher rates than they had previously.

The most important thing you can do in this market is shop around for your best rate and product. Many Canadians are still very unaware that they don't have to stick to their bank for a mortgage.

We exist to do the looking on behalf of our clients, checking with several accredited and alternative lenders for the best solution and budget fit for their needs, while passing along a volume rate discount. We're fast, we speak several languages, and we're very good at what we do — which is why we have so many 5-star reviews.

First-time home buyers especially need expert advice to set them on a path to successful homeownership amid these higher rates.

Which rate should you choose? Variable rates have likely peaked and may offer instant budget savings on a climb down versus locking into a 5-year fixed rate and watching rates drop from the sidelines. You can always lock into a fixed rate if you get too nervous.

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 15,000 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 Alberta - Last Updated Feb 23 2024

5 Year Fixed Rate

4.84% - 6.89%

  2024 (average)

4.90%

6.89%

  January

4.90%

6.89%

  2023 (average)

5.03%

6.33%

  December

5.12%

6.89%

  November

5.44%

6.89%

  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

4.66%

5.84%

  February

4.67%

5.84%

  January

4.54%

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

2.76%

3.20%

  January

2.52%

3.07%

  2021 (average)

1.89%

2.41%

  December

2.39%

2.94%

  November

2.37%

2.91%

  October

2.09%

2.74%

  September

1.84%

2.39%

  August

1.79%

2.39%

  July

1.79%

2.39%

  June

1.79%

2.29%

  May

1.79%

2.29%

  April

1.89%

2.29%

  March

1.89%

2.29%

  February

1.62%

2.06%

  January

1.43%

1.99%

  2020 (average)

2.02%

2.43%

  December

1.49%

1.99%

  November

1.59%

1.99%

  October

1.62%

2.04%

  September

1.77%

2.05%

  August

1.82%

2.22%

  July

1.89%

2.39%

  June

1.99%

2.42%

  May

2.23%

2.65%

  April

2.43%

2.88%

  March

2.35%

2.68%

  February

2.49%

2.86%

  January

2.64%

3.01%

  2019 (average)

2.76%

3.09%

  December

2.55%

2.92%

  November

2.40%

2.92%

  October

2.52%

2.94%

  September

2.45%

2.85%

  August

2.47%

2.79%

  July

2.57%

2.84%

  June

2.66%

2.90%

  May

2.82%

3.09%

  April

2.92%

3.19%

  March

3.13%

3.38%

  February

3.32%

3.58%

  January

3.30%

3.69%

  2018 (average)

3.15%

3.61%

  December

3.39%

3.80%

  November

3.41%

3.83%

  October

3.22%

3.67%

  September

3.19%

3.67%

  August

3.19%

3.66%

  July

3.14%

3.61%

  June

3.14%

3.61%

  May

3.14%

3.61%

  April

3.00%

3.54%

  March

3.00%

3.54%

  February

3.04%

3.48%

  January

2.93%

3.37%

  2017 (average)

2.53%

2.88%

  December

2.79%

3.29%

  November

2.72%

3.29%

  October

2.84%

3.28%

  September

2.76%

3.16%

  August

2.59%

2.99%

  July

2.56%

2.78%

  June

2.39%

2.49%

  May

2.24%

2.54%

  April

2.30%

2.62%

  March

2.39%

2.72%

  February

2.39%

2.72%

  January

2.44%

2.74%

  2016 (average)

2.29%

2.58%

  December

2.42%

2.69%

  November

2.20%

2.47%

  October

2.09%

2.39%

  September

2.14%

2.49%

  August

2.24%

2.57%

  July

2.24%

2.57%

  June

2.24%

2.57%

  May

2.34%

2.59%

  April

2.34%

2.59%

  March

2.34%

2.69%

  February

2.39%

2.69%

  January

2.49%

2.69%

  2015 (average)

2.45%

2.66%

  December

2.47%

2.69%

  November

2.47%

2.69%

  October

2.33%

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

2.54%

2.79%

  January

2.59%

2.79%

  2014 (average)

2.87%

3.04%

  December

2.72%

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

2.89%

3.04%

  May

2.89%

3.04%

  April

2.97%

3.15%

  March

2.97%

3.15%

  February

3.09%

3.29%

  January

3.19%

3.39%

5 Year Variable Rate

5.99% - 7.3%

  2024 (average)

5.99%

7.30%

  January

5.99%

7.30%

  2023 (average)

5.77%

6.96%

  December

5.99%

7.30%

  November

5.99%

7.30%

  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)

2.93%

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

1.65%

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%

1.65%

  March

1.24%

1.65%

  February

1.24%

1.65%

  January

1.29%

1.75%

  2020 (average)

1.91%

2.24%

  December

1.38%

1.79%

  November

1.55%

1.80%

  October

1.55%

1.90%

  September

1.63%

1.88%

  August

1.67%

2.00%

  July

1.79%

2.03%

  June

1.79%

2.03%

  May

1.96%

2.23%

  April

2.01%

2.41%

  March

2.24%

2.64%

  February

2.70%

3.10%

  January

2.70%

3.10%

  2019 (average)

2.70%

3.20%

  December

2.70%

3.10%

  November

2.70%

3.10%

  October

2.70%

3.10%

  September

2.70%

3.10%

  August

2.70%

3.10%

  July

2.70%

3.10%

  June

2.70%

3.10%

  May

2.70%

3.20%

  April

2.75%

3.20%

  March

2.75%

3.40%

  February

2.70%

3.45%

  January

2.65%

3.45%

  2018 (average)

2.34%

2.89%

  December

2.65%

3.35%

  November

2.65%

3.25%

  October

2.48%

3.02%

  September

2.40%

2.80%

  August

2.40%

2.80%

  July

2.40%

2.80%

  June

2.15%

2.62%

  May

2.19%

2.55%

  April

2.21%

2.85%

  March

2.21%

2.85%

  February

2.21%

2.85%

  January

2.17%

2.94%

  2017 (average)

1.90%

2.46%

  December

1.98%

2.75%

  November

1.98%

2.75%

  October

2.05%

2.75%

  September

2.15%

2.67%

  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)

1.97%

2.18%

  December

2.10%

2.20%

  November

2.02%

2.16%

  October

1.90%

2.05%

  September

1.90%

2.05%

  August

1.85%

2.05%

  July

1.92%

2.15%

  June

2.05%

2.25%

  May

1.98%

2.25%

  April

1.98%

2.25%

  March

1.98%

2.25%

  February

1.98%

2.25%

  January

2.00%

2.28%

  2014 (average)

2.29%

2.44%

  December

2.13%

2.35%

  November

2.15%

2.35%

  October

2.15%

2.35%

  September

2.20%

2.35%

  August

2.25%

2.35%

  July

2.30%

2.50%

  June

2.35%

2.50%

  May

2.35%

2.50%

  April

2.35%

2.50%

  March

2.40%

2.50%

  February

2.40%

2.50%

  January

2.40%

2.50%