Will Mortgage Rates Increase in Canada in 2021?

November 20, 2020 | Posted by:

Will Mortgage Rates Increase in Canada in 2021

This question is on the top of the mind and tip of the tongue of hundreds if not thousands of prospect buyers throughout the greater Winnipeg area. While we know that EVERYONE is eager to leave 2020 in their rearview is it wise to wait to see what happens? Will mortgage rates increase? Let’s take a practical look at why you might want to act now and move forward with that home purchase.

Key Indicators That Mortgage Rates Will Increase in 2021 and Why You Should Start the Mortgage Process Today

Pfizer to the Rescue

Pfizer was once best known for their introduction of the little blue pill to the world, but that has changed. In fact, they may now be known as our savior, eradicating the pandemic and bringing life back to the economy at the same time. 

Their announcement of a very promising COVID-19 vaccine has already caused financial markets to rebound. This positive effect has been compounded by Moderna’s own announcement of a vaccine nearly equal in effectiveness (94.5% to Pfizer’s 95%). At press, Ontario’s Health Minister Christine Elliott stated that Canada is expected to receive millions of doses of both vaccines by the end of January.

This is the news that humanity has been waiting for. And among humanity (despite what some may say) are those behind the Bank of Canada (BoC) who have been waiting for the opportunity to raise the prime rate at the first solid sign of economic recovery. Right now, there is no stronger indicator of economic recovery than the end of the COVID-19 pandemic. 

When the vaccine indeed rolls out in 2021, you can expect mortgage rates (tied to both bond yield and prime rate) to increase accordingly. While this is the first time in history the buyers are actually happy to hear that rates will rise, you will still want to act before they do and stake your claim on a mortgage. If you’re buying in Winnipeg, call Ron Chan today to get started.

Mortgage Rates Are at Historical Lows

For obvious reasons the BoC has kept the prime rate in place through all of 2020. The bond yield has also maintained. In response variable and fixed mortgage rates correspondingly dropped to historic lows. What follows historic lows? An inevitable increase. The bottom line is that mortgage rates can’t sit at the rock bottom for any longer. They won’t go up for the remainder of 2020, or if they do the difference will be negligible. But come 2021 you can expect to see them begin to rise for the simple reason that what goes down must eventually go back up. In fact bond yields in Canada jumped on vaccine news (as per above) in November, with 5-year bond yield hovering around 0.50% for the first time since early June. Given that bond yields lead fixed mortgage rates, observers suggest 5-year fixed mortgage rates can only head higher through 2021. Again, if you’re buying in Winnipeg, call Ron Chan today before the rise in rates becomes more significant than you’re willing to bear.

Back to Main Blog Page