Record low mortgage rates could last two years
Five-year mortgages at 1.89 per cent as Bank of Canada cuts rates for mortgage stress test for second time this year
Record low mortgage rates for homes and multi-family properties will continue for at least two years, according to the Bank of Canada (BOC) as it chopped the qualifying rate for the mortgage stress test August 14 for the second time this year.
The Bank of Canada lowered its five-year conventional mortgage rate from 4.94 per cent to 4.79 per cent, the second rate cut since May.
The reduction lowers the qualifying rate under the mortgage stress test – which all buyers must qualify for – but it is far above actual lending rates that have plunged to among the lowest level in Canadian history.
Buyers need to qualify at the BOC five-year rate, but they don’t have to pay it.
HSBC Canada, Canada’s seventh largest bank, was offering a five-year, fixed rate of 1.89 per cent as of August 14, available for 120 days.
The current lowest five-year rates from Canada’s big six banks as of August 14 are 2.19 per cent at Royal Bank of Canada, Scotiabank and CIBC, according to RateSpy.
Mortgage brokers are offering even lower rates, with Toronto-based Butler Mortgage dangling a 1.66 per cent five-year fixed-rate on mortgages of at least $300,000 with as little as 5 per cent down.
Homebuyers can also do the math: paying a 2 per cent annual mortgage rate when the national average home price is increasing at rate of 5.4 per cent annually, according to June data from the Canadian Real Estate Association, is an incentive to buy now.
In B.C., the average home price in July was up 12.9 per cent from a year earlier to $770,810, according to the BC Real Estate Association.
Further, the Bank of Canada states that lending rates will remain low for a long time.
Bank of Canada governor Tiff Macklem said in an August 14 press conference that what he wants Canadians to take away from the BOC rate cut actions is “Canadian interest rates are very low and will remain very low for a very long period.”
Macklem told reporters the BOC will not raise rates until the inflation hits its 2 per cent target on a sustainable basis, which he estimates will take at least two years due to a COVID-19-stunted economy.
Mortgage Broker for Surrey BC. Mr. Lakhvinder Gill – Call us (604) 725-6734
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