When Will Mortgage Rates Go Down in Alberta?
If you're wondering when mortgage rates will go down in Alberta, you're not alone. Many homeowners and potential buyers are keen to find out what the future holds for interest rates. In both June & July 2024, the Bank of Canada lowered interest rates by 25 basis points, signalling a potential shift in mortgage rates.
This is a significant move as it's the first change of direction in a long time, which might lead to lower mortgage rates in the near future. Over the past few years, we've seen mortgage rates increase due to various economic factors. Combined with rising home prices In Alberta, this has left many Albertans waiting for rates to go down.
Key Takeaways
Recent rate cuts by the Bank of Canada might lead to lower mortgage rates.
Alberta's strong housing market has seen fluctuating mortgage rates over the years.
Ask an expert to make the best decisions for your mortgage.
Current Mortgage Rate Trends in Alberta
Mortgage rates in Alberta have seen notable changes in recent years. These shifts reflect broader economic conditions and policies.
Right now (July 2024), high-ratio, 5-year fixed mortgage rates in Alberta are around 4.49%. In contrast, high-ratio, 5-year variable rates sit at 5.70%.
These rates can change based on factors like economic performance and policy adjustments by the Bank of Canada.
Rates for different term lengths also vary. For the most up-to-date mortgage rates, apply for a mortgage pre-approval.
Historical Mortgage Rate Trends in Alberta
Mortgage rates in Alberta have varied over the years. Understanding these trends can help you make informed decisions about future rates.
1970s: During the 1970s, mortgage rates were relatively stable. Rates ranged from 8% to 12%.
1980s: The early 1980s saw ultra-high mortgage rates due to inflation. Rates jumped dramatically, reaching up to 18%.
1990s: In the 1990s, rates began to stabilize again. The average rates hovered between 8% and 10%.
2000s: The 2000s experienced a significant decline in mortgage rates. Rates dropped to around 5% to 7%.
2010s: The 2010s saw historically low mortgage rates, particularly after the 2008 financial crisis. Rates were often between 3% and 5%.
So even though mortgage rates might feel high lately, current mortgage rates are actually relatively low when looking at the last 50 years.
Factors Influencing Mortgage Rates
Economic Indicators
Economic indicators such as GDP growth, unemployment rates, and consumer spending significantly influence mortgage rates. When the economy is strong, with high GDP growth and low unemployment, demand for housing tends to rise. This can lead to higher mortgage rates as lenders adjust to increased demand.
On the other hand, during economic downturns, mortgage rates may decrease to encourage borrowing and stimulate the economy. You should pay attention to economic reports and forecasts to gauge potential changes in mortgage rates.
Bank of Canada's Policy
The Bank of Canada plays a crucial role in determining mortgage rates through its monetary policies. By setting the "overnight rate," which is the interest rate at which major financial institutions borrow and lend one-day (or “overnight”) funds among themselves, the Bank influences the lending rates offered to consumers.
When the Bank of Canada raises the overnight rate, mortgage rates typically follow. Conversely, if the Bank lowers it, borrowing costs usually decrease. Keeping an eye on the Bank of Canada's interest rate announcements and policy updates is key to anticipating mortgage rate movements.
Inflation
Inflation and employment rates are critical drivers of mortgage rates. High inflation often leads to higher mortgage rates as lenders seek to maintain their profit margins against the declining purchasing power of money. Conversely, low inflation can result in lower mortgage rates.
Predictions for Future Mortgage Rates
Most experts forecast that mortgage rates, which peaked at 6.4% in the last 3 months of 2023, will continue to drop in the second half of 2024. This is based on factors like the Bank of Canada's economic policies and inflation trends.
Economists also emphasize that reduced inflation could lower rates. With inflation stabilizing, it's a good indicator that rates might ease. Still, the current policy rate suggests a cautious approach from the Bank of Canada.
Strategies for Homebuyers
Mortgage Renewals
If you have a mortgage coming up for renewal in the next few months it’s important to speak to a mortgage broker and make sure you know all of your options. Signing on the dotted line with your current lender may not be the best strategy. If you believe rates will continue to decrease, you may want to consider a temporary variable rate mortgage, but it’s important to note that variable rates are currently higher than fixed rates, as such, it will cost you to maintain your flexibility. To make sure you’re on top of your renewal strategy, use Spire’s Renewal Reminder.
Mortgage Refinances
In Alberta, property prices have increased in the last few years and many Albertan’s are taking advantage of this to withdraw equity to pay down higher interest debt, invest or renovate their current homes. When your mortgage is coming up for renewal, you will have the opportunity to renew or refinance. Refinance rates are different than renewal rates, so make sure to speak to your mortgage broker to confirm the best strategy for you.
Home Purchases
If you’re purchasing a home and you think that interest rates will continue to drop, a temporary variable rate might be the best option. Any good, variable rate mortgage will allow you to convert it to a fixed rate mortgage, for the same term or longer at any time without penalty. Make sure to speak to your mortgage broker about variable to fixed strategies at the time of your offer.
If your purchase or new build doesn’t close for a few monts, rates may continue to decrease. Make sure to stay in touch with your mortgage broker, there may be opportunities to further decrease the rate as you move towards closing. Remember that you are never obligated to any mortgage rate or product until you actually TAKE the money from the lender.
Will Mortgage Rates Decrease?
Mortgage rates in Alberta have seen significant changes recently. If you're looking for a mortgage, it's crucial to stay informed.
Getting expert advice can help you make a well-informed choice. To navigate this complex market, contact the mortgage experts at Spire Mortgage.
