Bank of Canada Mortgage Rate Announcement - March 2021

March 15, 2021 | Posted by: Ron Chan

Bank of Canada Mortgage Rate Announcement - March 2021

The Bank of Canada (BoC) made its quarterly announcement last week. To allow for the real estate market to adjust we have waited the required days before providing our breakdown of the update and how it applies to home buyers. Here’s what you know if considering buying a home this spring of 2021.

What Home Buyers Need to Know About the Early Spring 2021 Bank of Canada Announcement Regarding Borrowing Rates

Bank of Canada Overnight Rate Maintained at .25%

The news about the prime rate is no different than our January 2021 announcement from the BoC. And we stated that it would not change in our mortgage predictions for 2021 report. However, not everyone expected the second quarter proclamation to back a holding pattern. Some expected there to be an overnight rate increase. This is because in the final business week of February there was a significant surge in the Canadian bond yield (up to.67%) that made it hit its highest level in 12-months - an indicator that the economy is coming back stronger than anticipated.

Variable Rates to Remain Low (until 2023?)

With the BoC prime rate closely tied to variable mortgage rates, the March 2021 announcement is good news for those who prefer variable rate mortgages. In fact, the Bank of Canada stands by its expectation that there will be no rate hikes until early 2023. This is huge, and may incentivize those who typically lean towards fixed rate mortgages.

How High Will Fixed Rates Rise?

With the bond yield recently rising there has been some upward movement in the 5-year fixed rate market. In response, some buyers in Winnipeg are looking to lock into the rates while they still sit at near record lows. This is a good decision given how low they are, and before they (along with housing prices) rise further. Here’s your guide for how to lock in a mortgage rate in Canada. But will fixed rates rise enough to put a scare into buyers who plan on getting a mortgage later in 2021? 

in addition to keeping borrowing rates low, the Bank of Canada announced that it will maintain its current bond-buying pace, which is currently $4 billion per week (minimum). They have indicated that they will keep the pace in place until Canada’s economic recovery is “well underway” and sustainable. This program is known as quantitative easing. It exists to keep fixed mortgage rates lower than they otherwise would be during a bolstering economic period. 

Ironically it’s the fixed rate market that seems less certain at this point. What’s good for the economy may not be so great for those who prefer fixed rates. But what is certain, is that right now they are extremely favorable. If variable rates are not on the table for you, lock into a 5-year program right now. Getting pre-approved through Winnipeg mortgage broker Ron Chan can hold the mortgage rate you are offered for 120 to 160 days.

Should You Buy Now?

If basing your decision on mortgage rates alone we’d say that you can comfortably afford to wait until the fourth quarter of 2021 if you really need to. But there is more to consider. In our recent report on how Winnipeg is the hottest real estate market in Canada we noted the fact that home values have been rising steadily through 2020 into 2021. This is sparked by extremely low borrowing rates AND a tightening of residential inventory due to the halt on a number of housing construction projects in 2020. While new construction will get underway with economic recovery this won’t impact supply of readily available (for move-in and turnkey) homes until 2022-23. So home prices will indeed continue to rise. This week the Canadian Real Estate Association (CREA) stated that the average price of a home in Canada could rise over 16% in 2021. And in the aforementioned hottest real estate market in the country (Winnipeg) that number can rise even higher. 

When factoring what is expected to happen this year with home values in Winnipeg, the announcement about whether to buy is in the affirmative. Those who do so earlier than others will not just enjoy great rates and a more reasonable inventory (for now) they will also find peace of mind that their investment will grow from the moment of purchase into 2022 and beyond - especially in Winnipeg. Call Ron Chan at 204.290.9950 to get pre-approved.

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