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When will mortgage rates drop in Thorold?

Dan Eisner, True North Mortgage’s CEO, talks about whether the rate hikes are done for 2023 and when we might expect some relief.
DanEisner

Our still-high inflation and hot jobs market are weighing on the state of mortgage rates — whether they’ll hold at current highs, continue to go up, or eventually come down.  

As founder and chief executive officer of a top mortgage brokerage offering the lowest rates in Canada, I’m often asked about what’s going on with rates. Here's my rate prediction so far for 2023. 

Will the rate hikes actually pause? 

Rates have gone up 4.0 percent since last March. That’s the most in one year since the 1990’s. In January, the Bank of Canada (BoC) finally said out loud that it might be ready to stop and let its hike agenda work its way down to everyday spending decisions. 

But what's still troubling our central bank? It would be our very low unemployment rate. Despite spending and (some) prices trending lower, our strong labour market and international supply-chain concerns have the BoC wary that inflation may get sticky on the way down or start to trend back up. 

I'm still expecting a pause at its next meeting or two at least, leaving its policy rate at the current 4.50 percent (with most bank prime rates at 6.70 percent, not factoring in any variable rate discounts that lenders like us may offer). The BoC is concerned about the effect of higher rates on indebted Canadian households and likely wants further evidence before deciding whether its benchmark rate needs more ratcheting. 

Will we see convincing declines in inflation in the next few months? That will help the BoC continue to stand pat, assuming our job market doesn't let us in for more surprises (like continued higher demand and spending). 

Could rates go up again? 

Last month's inflation numbers were encouraging, clocking in lower than projected. However, inflation and employment increased south of the border, sending Canadian bond yields (and therefore fixed mortgage rates) higher. 

This latest volatility likely pushes the hope of seeing an interest-rate drop into early 2024 — even renewing the possibility that the central bank isn't quite done trying to cool things down. 

If inflation doesn't come down fast enough, or our economy doesn’t show clear signs that it's slowing to a crawl, the BoC may consider raising rates again within the first half of 2023. (They've often said that their only concern is getting inflation under control, regardless of whether it sparks a recession.) 

Are we in for a soft landing or a hard thud? 

If rates truly are paused, all the central bank’s machinations and efforts could magically line up with the right numbers for a glowy-soft economic touchdown — which is not what many economists expect after this past year's market turmoil. But yes, there’s still a scenario where we’ll come out of this without a recession or only a mild one. 

If rates do notch higher, the possibility of a more severe or protracted recession increases. That would inflict more consumer pain as rates stay high and job losses mount to add troubling financial pressure amid higher Canadian household debt levels

When might we see rates start to drop? 

A recessionary ‘hard thud’ would come with better news for mortgage rates. The Bank of Canada would finally have good reason to back down, perhaps quickly, providing some rate relief when we'll likely need it most. 

If  we manage to avoid that scenario and plod along with markets slowly correcting, Canadians holding a variable-rate mortgage may not see any rate relief until at least early 2024, assuming the BoC has inflation squarely in its ‘back-down-to-2.0-percent-target’ sights to start dropping  rates. 

What’s going on with fixed rates? 

Bond yields, the primary influencer of fixed mortgage rates, have trended upwards recently in response to both Canadian and U.S. factors, pushing many fixed mortgage rates up by around 0.25 percent. That doesn't necessarily mean they'll continue to go up; they're expected to eventually trend lower as rate markets move towards a decline on the horizon. You can watch the fluctuations in 5-year bond yields in reaction to the latest economic news. 

As time goes by, assuming no more rate hikes, fixed rates may slowly decline as 2023 plods along, maybe as much as 0.50 percent for the commonly chosen 5-year fixed term. 

Keep up-to-date on my rate predictions here with my 2023 Rate Forecast blog. Predicting rates is a 50/50 game but if we don’t attempt to forecast, we can’t help prepare or protect our mortgage clients. 

Wherever mortgage rates are going, make sure to get your best one. 

Canadians have had to adjust to higher rates, especially those with a variable-rate mortgage or coming up for renewal from previously much-lower fixed mortgage rates. True North Mortgage has helped many of their clients realign their mortgage budgets and decisions to save the most. 

This top brokerage exists to offer a better mortgage choice. Your best rate and great advice come from unbiased, salaried brokers who believe in providing personalized service to help you save. It’s why they’ve garnered over 13,000 5-star reviews, the most in the industry by far.

Worried about rising rates? 

True North Mortgage’s highly trained brokers can help you prepare for rate hikes or reduce your risk with options that fit your situation. 

Talk to a friendly broker over the phone at 1-877-778-4772, follow the link to apply online, or open a chat on their website: Canada’s No. 1 Mortgage Broker.