If you’ve been holding off on buying a home because mortgage rates felt out of reach, there’s good news—affordability is improving. After a series of aggressive rate hikes by the Bank of Canada (BoC), we’re now seeing relief, making it easier to qualify for a mortgage and secure a home.
Lower Interest Rates, Higher Affordability
The Bank of Canada has officially cut rates, bringing the benchmark rate down by 2.25% from its peak. This shift means lower monthly mortgage payments and reduced income requirements for qualification. Additionally, 30-year amortizations are now available on insured mortgages, stretching payments over a longer period to further ease the financial burden.
For context, here’s how a recent $700K insured mortgage looks compared to last year:
| Metric | 2023 | 2025 | Difference |
|---|---|---|---|
| Interest Rate | 6.5% | 4.25% | -2.25% |
| Amortization | 25 Years | 30 Years | +5 Years |
| Monthly Payment | $4,877 | $3,550 | -$1,327 (-27%) |
| Income to Qualify | $164,000 | $122,000 | -$42,000 (-26%) |
This means homeownership is back within reach for more buyers, especially those who struggled to qualify under last year’s higher rate environment.
What This Means for Homebuyers
- Lower Monthly Costs: Your mortgage payments are now significantly lower, freeing up more budget for savings, renovations, or investments.
- Easier Qualification: A lower stress test threshold means buyers need less income to qualify for the same mortgage amount.
- More Buying Power: You may now afford a larger home or better location without increasing your budget.
- Better Refinancing Opportunities: If you bought at a higher rate, refinancing could dramatically reduce your payments.
Impact on Variable and Fixed Rates
- Variable Rates Catching Up to Fixed: Following the BoC’s latest rate cut, variable mortgage rates are now nearly on par with fixed rates. Some experts predict they could dip below fixed rates by spring 2025.
- Rate Cuts Already Saving Homeowners Money: According to Ratehub.ca, a homeowner with a 5-year variable rate mortgage on an average Canadian home can now expect to pay $87 less per month.
- Fixed Rates Seeing Modest Decreases: While bond yields dropped slightly, experts say inflation concerns could prevent dramatic reductions in fixed rates for the near future.
Looking Ahead: More Rate Cuts to Come?
Industry experts suggest the Bank of Canada may cut rates again within the next four months, which would bring further relief for borrowers. If inflation stays controlled, variable rates could even start with a three by late 2025.
Thinking About Buying or Refinancing?
With rates falling and affordability improving, now is the time to explore your options. Whether you’re a first-time buyer, seller, or investor, our team can help you navigate the market and secure the best deal.
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