Canadian Mortgage Loans Are Still Being Issued At Dirt Cheap Interest Rates

Canadian mortgage rates are surging higher but are mortgage rates now high? Bank of Canada (BoC) data shows interest costs for new mortgage lending climbed sharply in May. Rates are rising from record lows, stimulus-levels, and largely just normalizing. New mortgage borrowers were still paying less interest than they would have in 2019.

Uninsured Mortgages Were Going For Rates Similar To Feb 2020

Let’s start with uninsured mortgage interest, which is the majority of new debt. New uninsured borrowers paid an average of 2.97% in May, up 0.21 points in the month, and 1.01 points from last year. It’s a sharp climb for a year, but it’s also coming off incentivized stimulus rates. It’s only the highest rate since February 2020, failing to even compare to a period prior to the recession. 

Canadian Mortgage Rates Were Rising But Still At Recession Levels

The average interest rate obtained by residential mortgage borrowers across Canada.

Source: Bank of Canada; Better Dwelling.

It’s true — fixed rate lending has climbed more sharply, and it’s offset by more variable debt. However, fixed rate mortgages for 5 years or longer were still lent at an average of 3.43% in May. It’s an increase of 0.17 points from a month before and 1.32 points from last year. Once again, a substantial climb representing nearly a 50% increase from last year. 

Still, this isn’t a record shattering, multi-decade high for fixed term borrowing. March 2019 rates were higher, which wasn’t that long ago. Borrowers from that period on 5-year terms still haven’t renewed yet. That’s how recent it was.

Insured 5-Year Fixed Mortgages Were Only At 2019 Levels 

Canadian insured mortgage interest rates are on a similar timeline, as you’d expect. Insured mortgage funds disbursed for new loans had an average rate of 3.15% in May. This is up 0.22 points for the month and 1.03 points higher from last year. May’s average is the highest seen since the beginning of time. Whoops, that’s not right — it’s the highest since February 2020. The recession discount is gone, but are costs high? Not particularly. 

Canadian Fixed Rate Mortgages Are Rising But Not Exactly “High”

The average interest rate obtained by Canadian residential mortgage borrowers for a fixed term of 5-years or longer.

Source: Bank of Canada; Better Dwelling.

Insured fixed mortgages are on a sharper ascent but still at highs seen just a few years ago. New insured mortgage borrowers paid an average interest rate of 3.32% in May for a fixed rate of 5-years or longer. It’s an increase of 0.18 points in the month and 1.29 points from a year before. It’s the highest rate since April 2019 — once again, not really that long ago.

Canadian mortgage rates are climbing from record lows and doing so very sharply. They’re also likely to continue rising as inflation and interest rates move higher. It’s a 40-year high for inflation and a 2-3 year high for mortgage rates, so it’s not really a punishing, demand slowing level. Excess demand was just being stimulated with excessively low interest rates.



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  • Trader Jim 2 years ago

    and the minor increase was enough to get the industry to declare people aren’t buying because 2%, the inflation rate, was high.

    Reality is this was a speculative bubble like most asset classes & people needed basically any reason to stop paying.

  • GTA Landlord 2 years ago

    haha. 3% is the wrecking ball that took down the multi trillion dollar housing market where prices were rising 30% – 60%? People are going to have a hard time adjusting to the fact some people just overpaid to get a home during the pandemic, often leveraging their old place to get it since they thought rents would cover the payments. That might be true but assets adjust and rental yields are improving, meaning a loss in the short-term.

    Hopefully new landlords remembered to keep a runway because if they’re forced to sell they can take a big bath. Good discount for people looking to buy for themselves though.

  • Rate Dude 2 years ago

    Maybe you could comment on the use of pre-approvals. Clearly, rates were lower 2 to 4 months ago.

    For people who obtained pre-approved 5 year fixed rates, May’s transactions reflect the past rate environment.

    Pre-approvals will matter less as rates peak and stabilize, and even much less as rates eventually decline.

    So transacted rates reflect lower than prevailing current rates, given large increase.

    • Mortgage Guy 2 years ago

      5-year variable is 2.7% and 5-year fixed for 4.75% (or lower) today. These are still lower than 2019 and the interest rates are still below the start of March 2020. If you’re looking for a 5-year fixed it might be lower, might be higher. But it’s certainly not expensive, homes are what’s expensive.

  • Greg Viger Broker 2 years ago

    Article is misleading in that the data being quoted as May rates fails to clearly identify that such an average is a combination of variable and fixed rate holds which was not the market environment from the period it was compared to.

    A true and proper comparison should look at real variable (including at moment in time available discounts to prime) and typical fixes rates available in a specific category (insured, insurable, conventional).

    That said, the major point that rates were largely still only near pre-pandemic levels through 2022Q1 was valid.

    Even today in the high 4% for a fixed are still below the 10 year average up to 2008 which was 5.25%. We are just getting closer to ‘normal’ and by no means are rates high for the BoC inflation target range. However residential prices need an enormous adjustment to be affordable at ‘normal’ rates. Most people lost sight that price increases are driven by payments (low rates or as in 2005, longer amortizations). As rates go up, pressure is on prices to drop or wages to rise.

    • rw 2 years ago

      Not misleading, that’s how the central bank reports. What’s misleading is mortgage brokers trying to give per second advice like their only training wasn’t a weekend at an airport hotel

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