Interest rates around the world have fallen sharply amid a pandemic-induced economic crisis, and the result is that it has never cost less to borrow money to buy a house in Canada.
Rates on Canadian mortgages have fallen to their lowest levels ever, with one bank ― HSBC Canada ― now offering a five-year, fixed-rate mortgage at 1.99 per cent.
HSBC’s offer is “Canada’s lowest bank-advertised five-year fixed rate ever, according to our records,” mortgage comparison site RateSpy wrote on its blog, noting also that it’s the first time this type of mortgage has been offered below 2 per cent.
“HSBC’s move not only reflects historically low funding costs, but its continued drive to brand itself as Canada’s most competitive lender,” RateSpy said. “The likes of RBC, TD, Scotiabank, BMO and CIBC could easily undercut this rate if they wanted to, but they likely won’t near-term.”
But with interest rates falling around the world, other lenders are also cutting their rates, and mortgages in general are “at an all-time low now,” said James Laird, co-founder of Ratehub.
That, coupled with emergency lockdowns lifting, has Laird expecting to see a pick-up in home sales in June.
“We’re seeing a ‘mini’ spring home-purchase market emerging right now, which is interesting to watch,” he said. “It’s going to be a far better month from a home sales perspective than the last two months have been.”
New rules cut maximum purchase price
Unfortunately for buyers, those rock-bottom rates come just as new mortgage insurance rules come into place that will reduce the maximum purchase price for those who have less than 20 per cent for a down payment.
The new rules to qualify for mortgage insurance from Canada Mortgage and Housing Corp. (CMHC) are expected to cut the maximum purchase price for borrowers of insured mortgages by up to 12 per cent, more than offsetting the drop in mortgage rates for those who can’t come up with a 20-per-cent down payment.
CMHC head Evan Siddall recently warned that Canada risks financial instability because of high and rising household debt levels.