Canada's baby boomers once dreamed of cashing out their properties to enjoy a comfortable retirement. But the reality is harsh. Under the continuous pressure of the central bank's high interest rates, the good old days of living on borrowed money are gone. Seven consecutive rate cuts, yet mortgage rates remain stubbornly high, driving people crazy!
Today, let's discuss the latest reports from Canadian media: mortgage rate cuts are unlikely in the short term! The central bank is determined to maintain high interest rates for even longer! At the end, I'll share a bloody example: a guy's real estate speculation "one-year tour" ended in a bitter exit.
High housing prices make it difficult for young people to afford homes. The pressure from bank loans shows no sign of easing. Although the central bank has cut interest rates several times, hoping for mortgage rate cuts is likely a pipe dream.
Interest Rate Cuts? Dream On!
A report in a Toronto newspaper poured cold water on those hoping for a breather from interest rate cuts: mortgage rates are unlikely to fall in the foreseeable future! Most fixed-rate mortgages are linked to the five-year government bond yield, which is affected by the uncertainty brought by U.S. tariffs.
Many people may think that as long as the central bank cuts interest rates, mortgage rates will follow. But the reality is that the central bank can only control the overnight lending rate, which is the short-term rate. Long-term locked rates follow government bond yields. Canada's government bond yields closely follow the U.S. If U.S. yields remain high, Canadian mortgage rates will naturally be difficult to fall.
A Look at the Latest Mortgage Rates
Here are some common mortgage rates in Canada:
| Mortgage Type | Lowest Rate (Current) | Lowest Rate (One Month Ago) |
|---|---|---|
| 5-Year Fixed Rate with Insurance | 4.09% | 3.99% |
| 5-Year Fixed Rate without Insurance | 4.19% | 4.09% |
| Mortgage Term Over 30 Years | 4.29% | 4.19% |
Note that the above rates are for reference only, and the actual rate is also related to the loan amount and personal credit score.
Are current interest rates high? The report says that this is the historical normal rate! The low interest rates of the past 15 years were caused by the "abnormal" phenomenon of the U.S. subprime mortgage crisis. In the future, high interest rates may be the norm.
If you review the data from the past 100 years, you will find that the average interest rate of the Bank of Canada is about 4%-5%. Even if you only look at the past 30 years, except for the Fed's long-term maintenance of ultra-low interest rates after the U.S. subprime mortgage crisis, mortgage rates were not low at other times.
Central Bank's "Hawkish" Voice
The central bank not only has no plans to cut interest rates, but even hints that it will maintain them for even longer! Deputy Governor Sharon of the Bank of Canada gave a very "hawkish" speech publicly.
Sharon said that the central bank is increasingly relying on non-traditional data and dialogue with Canadians to understand how trade uncertainty and high interest rates affect households and businesses. This data ultimately prompted the central bank to maintain its policy rate at 2.75%.
Most companies expect economic activity to weaken in the short term, which will put employment at risk. Companies also mentioned that the cost of all production necessities is rising, and they are likely to eventually raise prices to achieve balance.
Although overall inflation has eased, consumers' expectations for future inflation are gradually rising. Consumers' inflation expectations, combined with the continued cost pressures reported by companies, may make the Bank of Canada cautious when cutting interest rates in the future, thereby delaying further mortgage rate cuts. At the same time, with the rise in bond yields, fixed mortgage rates have also climbed in recent weeks, reflecting market concerns about inflation and trade tensions.
In summary, whether it is media reports or speeches by central bank officials, they are releasing a strong signal: high interest rates will continue! For those who are renewing their mortgages this year or next, high interest rates will greatly weaken consumption capacity and further affect economic recovery.
Real Estate Speculation "One-Year Tour" Ends in Financial Ruin
Finally, share a real-life example:
Last year, when everyone thought that the central bank's interest rate cut would cause housing prices to rise, a buyer surnamed Zhou bought a detached house in Oakville for $1,941,888 CAD. The house has four bedrooms, four bathrooms, an area of 3,000 square feet, and a land area of 3,500 square feet.
In January of this year, he wanted to sell the house for $2 million CAD. Subsequently, housing prices fell all the way. On May 30, someone finally made an offer, but only $1.86 million CAD.
It should be noted that before the start of the spring market in 2024, the listing price of this house was only $1.7 million CAD. This buyer surnamed Zhou forcibly added $240,000 to grab the offer. A year later, thinking that housing prices would be higher after the interest rate cut, he listed it for $2 million CAD. Next, he directly raised the price to $2.17 million CAD, thinking that it would be nice to earn $200,000 CAD a year.
As a result, over the next three months, the listing price fell all the way to his purchase price of $1.94 million CAD. Finally, at the end of last month, someone bought the house for $1.86 million CAD. The transaction price was $80,000 CAD less than his purchase price a year ago.
After entering 2025, more and more investment property buyers have come out to sell their properties. And in these two years, everyone will basically lose 5%-10%.
It seems that it is becoming more and more difficult to speculate in real estate in Canada now.
In the past 20 years, global governments have continued to "flood" the market, especially after the 2008 subprime mortgage crisis. In the past ten years, people have also become accustomed to the low-interest-rate environment, thinking that a 4% mortgage rate is a high interest rate, and 2.5% is a return to normal.
But the reality is that U.S. Treasury yields have hovered at 4.5% for a long time. The borrowing costs of long-term debt will not fall so easily in the short term. Therefore, those who have recently seen housing prices fall and the central bank cut interest rates and want to bet that future mortgage rates will also fall, it is best to carefully study the speech of the Deputy Governor of the Bank of Canada and speculate on the true attitude of central bank officials towards future interest rate changes.