Kurt Woock
Beth BuczynskiNerdy Insight: The best mortgage rates in Ontario edged up in April after rising government bond yields opened the door to higher three- and five-year fixed mortgage rates. These two popular fixed-rate options are still below 5% at many lenders, while variable mortgage rates will hold steady around 6% until the Bank of Canada reduces its overnight rate. That might not happen until June.
The best fixed and variable mortgage rates in Ontario
Mortgage Type
Purchase Price
Down Payment
Province
Term |
Fixed |
Variable |
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| 1-Year |
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| 3-Year | ||
| 4-Year |
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| 5-Year |
Disclaimer: These rates do not include taxes, fees, and insurance. Your actual rate and loan terms will be determined by the partner’s assessment of your creditworthiness and other factors. Any potential savings figures are estimates based on the information provided by you and our advertising partners. Mortgage Brokerage Licensed in ON #12984, BC #X301004, MB and AB. Homewise can pursue mortgage brokering activity in SK, NL, NS and NB.
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Ontario mortgage rate update: April 2024
Discounted mortgage rates have inched up in April. As of April 10, 2024, five-year fixed mortgage rates remain below 4.8% at some lenders, while three-year fixed mortgage rates can still be found for around 4.9%.
Recent activity in the government bond market could lead to slightly higher rates. The yields on three- and five-year bonds have been trending upward since late March. When bond yields rise or fall, fixed mortgage rates typically follow suit. Lenders are generally a lot quicker to increase their rates than they are to reduce them.
Variable mortgage rates remain elevated after the Bank of Canada held its overnight rate at 5% on April 10. The Bank’s rate hikes have likely come to an end, but the overnight rate, and variable mortgage rates, won’t be reduced until inflation is firmly under control and heading toward the Bank’s target of 2%. That may not occur until June or July.
The average mortgage rate in Ontario
Ontario doesn’t have a single average mortgage rate. Even if you could access all the current mortgage rates on offer, it wouldn’t be much help. That’s because any mortgage offer you receive is always specific to you. Lenders take into account multiple factors, such as credit score, the type of mortgage and the amount needed.
Think about the “average mortgage rate” the way you would Ontario’s average home price. It’s interesting data to have, but it’s not necessarily relevant to your own home buying journey.
2024 Ontario mortgage rate forecast
Variable mortgage rates
Variable mortgage rates are expected to finally begin decreasing in the first half of 2024. When they decline, and by how much, depends on the Bank of Canada’s overnight rate.
When inflation is running hot, the Bank raises the overnight rate to increase borrowing costs and cool the economy. Whenever the overnight rate increases, variable mortgage rates rise to the same degree.
If inflation trends closer to the Bank’s target rate of 2% in the first few months of 2024, it may feel confident lowering the overnight rate as soon as June. When the overnight rate falls, variable mortgage rates will soon follow.
Fixed mortgage rates
Because they’re driven by lenders’ reactions to activity in the government bond market, fixed mortgage rates can be difficult to predict over the long-term.
Based on bond activity in the latter half of February 2024, for example, lenders could drop their three- and five-year fixed mortgage rates moderately in March, but there weren’t many bargains on offer at the time of this writing.
Fixed mortgage rates could be somewhat lower by the end of 2024, but it’s unlikely that they’ll fall significantly below 5%.
Calculators to inform your home buying decisions
Ontario housing market update: March 2024
Spring has come early to the Ontario housing market. After a busy January, home sales rose 15.6% year-over-year in February, according to the Ontario Real Estate Association. Sales were still well below the five- and 10-year averages for the month, but buyers appear to be coming off the sidelines to take advantage of lower fixed mortgage rates. Fortunately for them, new and active listings are trending the right way. New listings rose 28.6% in February, while active listings and increased by 18.1%.
The average sale price in the province was $873,207 in February, 1.3% higher than a year ago. The average price in Toronto and Oakville-Milton, which accounts for about 40% of Ontario’s real estate sales, was $1,125,949.
Ontario home sales and price forecast
Real estate experts predict a more normal real estate market in 2024, though the bar for “normal” is low given the tumult of 2023. Many believe Bank of Canada interest rate hikes — a primary driver behind last year’s affordability crunch — are largely over. But exactly when and how quickly the Bank begins to taper interest rates down remains an important question mark.
A report released by real estate company Royal LePage forecasts home prices increasing about 5% by the end of the year, with most of that increase taking place in the second half of 2024. RE/MAX Canada suggests a more subdued average price increase of less than 1%.
Toronto home prices will rise about 6% in 2024, according to the Royal LePage report, and the average price for a single-family home will approach $1.5 million. One possible bright spot in the market could be an increase in housing supply, as mortgages taken out during low-rate environments expire and owners feel more willing to list. This may give buyers more options, however don’t expect it to push prices down.
Ontario first-time home buyer programs
Land transfer tax refund
When buying your first home in Ontario, you can claim a refund up to $4,000 of land transfer taxes. If you’re a first-time home buyer in Toronto, you may qualify for a $4,000 refund on your municipal land transfer tax.
Other first-time home buyer programs
Areas including Waterloo, the County of Simcoe, Kingston and Chatham-Kent have home buyer assistance programs that can keep costs down.
Ontario land transfer taxes
Land transfer tax is an unavoidable cost when buying a house in Ontario. The amount you’re charged is based on your home’s value.
You’ll pay:
- 0.5% on the first $55,000 of the home’s value.
- 1.0% on additional value that’s more than $55,000 and up to $250,000.
- 1.5% on additional value that’s more than $250,000 and up to $400,000.
- 2.0% on additional value that’s more than $400,000.
- 2.5% on additional value that’s more than $2,000,000 if the land contains one or two single-family residences.
And if you’re buying in Toronto, you’ll pay a municipal land transfer tax as well.
Guide to Ontario mortgage rates
Types of lenders in Ontario
Mortgage lenders in Ontario tend to fall into four categories, which include:
- Large chartered banks such as Scotiabank, RBC and TD.
- Credit unions such as Northern Credit Union and Alterna Savings.
- B lenders that work with borrowers with lower credit scores, such as MCAN and Equitable Bank.
- Private lenders, who typically deal with borrowers in need of short-term funding.
Types of mortgages in Ontario
Fixed-rate mortgages
The interest rate stays the same for the duration of the mortgage term in a fixed-rate mortgage, even if the market fluctuates. Fixed rates typically:
- Are higher than variable interest rates.
- Provide a greater sense of certainty. You can count on it remaining stable for the length of the mortgage term.
Variable-rate mortgages
Variable mortgage rates increase or decrease whenever your lender’s prime rate increases or decreases. Variable-rate mortgages typically have rates that:
- Can be lower than fixed rates at the time you apply for mortgages. Variable rates can save borrowers money over the length of their mortgage — but only if rates remain the same or fall.
- Can increase throughout a mortgage term. When interest rates go up, the monthly payment on a variable-rate mortgage can become more expensive.
» MORE: The difference between fixed- and variable-rate mortgages
Hybrid-rate mortgages
A portion of your mortgage is subject to a variable rate and another portion is at a fixed rate of interest. These mortgages:
- Can dampen the impact of fluctuating interest rates in a particularly turbulent or uncertain economy.
- Tend to be more difficult to transfer between lenders.
Insured and uninsured mortgages
If you buy a home for under $1 million, and your down payment is under 20%, you must insure your mortgage. Mortgage insurance adds to the cost of your loan. The cost of insurance equals a percentage of your mortgage, and the percentage depends on your down payment. The closer it is to 20%, the smaller your insurance payment is.
Homes worth $1 million or more require a down payment of at least 20%, so insurance is not required.
Short-term and long-term mortgages
Short-term mortgages last five years or less. Long-term mortgages last over five years. With a shorter mortgage, you’ll need to renew sooner, which can provide flexibility. Short-term mortgages often have lower interest rates than long-term mortgage rates.
Closed and open mortgages
The primary difference between closed and open mortgages is that you can pay off an open mortgage whenever you like and not pay a penalty. If you have a closed mortgage and make additional payments, you’ll generally be penalized.
Closed mortgages often offer better rates than open mortgages. But open rate mortgages may be a good option if you think you may be able to pay off your mortgage early.
» MORE: Understanding open and closed mortgages
How Ontario lenders determine mortgage rates
The mortgage rate you’re offered in Ontario will be based on two primary factors; one based on the state of the economy and one based on your financial situation.
Economic factors
Variable mortgage rates are influenced by the Bank of Canada’s overnight rate. When the overnight rate increases or decreases, a lender’s prime rate follows suit. Variable mortgage rates are based on a lender’s prime rate, so as the prime rate rises or falls, so do variable rates.
Fixed mortgage rates are determined by activity in the government bond market, particularly the yields on one-, three- and five-year bonds. Fixed mortgage rates follow the movement of those yields.
Your financial situation
Factors specific to you also affect the rates you’re offered. These include:
- Your credit score.
- Your income.
- Your total debts.
- The loan type you choose.
- The amount you’re borrowing.
- The term length and amortization period of your loan.
Lenders look for signs of risk when assessing these aspect
How to qualify for a lower mortgage rate in Ontario
Some factors behind rates are beyond your control, but there are steps you can take to possibly qualify for the best mortgage rates. For example, you can:
- Improve your credit score. A higher credit score generally results in better offers. Get a better score by eliminating existing debt and paying future bills in full and on time.
- Increase your income. It’s not always easy, but any additional income will improve your financial position. Lenders look at your income to assess your ability to afford a mortgage.
- Decrease your total debts. Pay down personal loans, student loans or other types of debts. Lenders consider your total debt load when determining the details of your loan.
- Consider all your options. See if adjusting the loan type, the term length or the amortization period of your loan could help.
Factors that affect mortgage affordability in Ontario
A home’s price and the rate you’re offered aren’t the only factors that affect how much mortgage you can afford. You’ll also have to account for the following components, which play a role in all mortgages.
Debt service ratios
Lenders use debt service ratios to determine how much of your income goes toward paying debt. If those ratios are too high, you may not qualify for the mortgage amount you need.
Car loans, credit cards and lines of credit are all examples of debt that require regular payments. Decreasing some of these balances, or relying less heavily on credit, can help you lower your debt service ratios.
The mortgage stress test
You will have to pass the mortgage stress test if you want a home purchase funded by a federally regulated financial institution.
The rules of the stress test say you must qualify for a mortgage at a minimum qualifying rate of either 5.25% or the rate you’re offered plus 2%, whichever is higher. If a lender offers you a rate of 5%, for example, you’ll have to demonstrate you can afford the same mortgage at 7%.
You may be able to avoid the stress test if you apply for a mortgage with a lender that is not federally regulated, like a credit union.
Your down payment
Your down payment is a critically important factor in determining mortgage affordability. The more you can put down, the less you’ll need to borrow. Your monthly mortgage payment will likely be smaller, and you’ll pay less in interest.
Mortgage term
The term is the length of time your mortgage contract is valid. In Canada, mortgage terms can run anywhere from six months to as long as 10 years.
Chances are that your mortgage will have multiple terms during the amortization period until you pay it off in full. Once your mortgage term ends, you can pay your loan off in full, renew it or refinance it.
Amortization period
A mortgage’s amortization period is the time it will take to pay off the loan in full. In Canada, the most common amortization period is 25 years. If your down payment is less than 20%, you can’t have an amortization beyond 25 years.
If your down payment is greater than 20%, you may find some lenders willing to offer amortization periods of up to 35 years.
Why would you want a longer amortization period? The longer your mortgage lasts, the smaller your monthly payment will be. You’ll pay more in interest, but that might be a worthwhile trade-off if it helps you keep your home.
How to compare mortgages from Ontario lenders
Use APR for greater accuracy
The annual percentage rate (APR) includes fees and closing costs the lender may charge in addition to the interest rate. A lender offering the lowest rate may actually have a higher APR due to those additional costs. Comparing APRs is the easiest way to see the complete cost of each offer.
Compare similar mortgages
For a comparison to be useful, the mortgages should have the same term, amortization period and payment frequency.
When looking for the best mortgage rates in Ontario, also consider:
- Mortgage type.
- Ease of application.
- Prepayment penalties.
- Customer service.
- Any other fees not included in the APR.
You can also compare mortgage rates in other provinces to get a sense of how the rate you’ve been offered in Ontario stacks up:
Working with a mortgage calculator can help you compare different mortgages in a single place.
Mortgage shopping is about more than just the interest rate
A low mortgage rate is usually a primary objective for buyers, but getting the lowest rate doesn’t necessarily mean you’re getting the best mortgage for your needs.
For example, you might opt for a fixed rate, which has a higher rate than a variable rate, if you’re uncomfortable with the risk of rates rising.
Or, if you expect to come into a sizable sum of money soon (via an inheritance, for example), paying a higher rate for an open mortgage, which allows you to pay it off early without penalties, could be worth it.
Frequently asked questions about Ontario mortgage rates
As of April 2024, you could still find fixed mortgage rates for less than 5% and variable mortgage rates for around 6%. The rate you’re offered will ultimately depend on factors like your credit score, total debt level and income.
Mortgage rates should decline at least somewhat in 2024. The Bank of Canada is expected to begin dropping its overnight rate in June, and each decline will be met with a similar dip in variable mortgage rates. Fixed mortgage rates should settle somewhere between 4% and 5% this year, but because fixed rates are determined by movement in government bond yields, they can be hard to predict.
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