When Will Interest Rates Drop? It Depends On Who You Ask

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Houses for sale in Ottawa

This article was submitted by Shubha Dasgupta, Founder and CEO of Toronto-based mortgage brokerage Pineapple.

In today’s dynamic housing market, there is one burning question on everyone’s mind: “When will interest rates drop?” The answer to that question depends on who you ask:


The Bank of Canada: “When we feel like it.”

Homebuyers: “Never.”

Homeowners: “Not soon enough.”

Myself: “They already have…”

What many Canadians may be unaware of is that fixed rates have already dropped 75 basis points from their peak last fall. A movement that was triggered by developments across the border, causing our five-year bond yield to react and banks to lower their fixed rates in response.

If you didn’t hear about this though, you’re not alone. This vital information has gone largely unpublished in the media — outside of real estate and mortgage-focused outlets — leaving most consumers and even other real estate professionals in the dark.

This is a crucial story that we simply can’t ignore. The lack of widespread media coverage on this topic has resulted in an unfair advantage for many homebuyers in an already supply-scarce environment. Buyers who’ve been actively working with a mortgage professional or keeping tabs on rate movements have already had the chance to take advantage of the lower rates to secure the home of their dreams. Everyone else, unaware of what has been going on, has been missing out on this window of opportunity.

It’s not just homebuyers either: consider the tens of thousands of variable rate mortgage holders desperately waiting for interest rate relief. They could have locked into a lower fixed rate to pay off some of their principal instead of only the interest.

When vital information fails to reach those who need it, they get left behind in a market that is already volatile. Had they been informed, they might have taken action to purchase a home or improve their financial condition.

Some might argue that a reduction of 75 basis points may not have been sufficient enough to help certain buyers qualify for a loan or convince sidelined individuals to move quickly. However, from my perspective, 75 basis points are the equivalent of three or more Bank of Canada rate drops, making it undeniably significant. In fact, it is so significant that it sparked a surge in real estate activity in January, with Vancouver experiencing a 38.5% increase in sales activity in January compared to a year earlier.

This surge in activity has happened as Canadians eagerly await lower prices, lower rates, and more inventory. The market has swiftly shifted beneath their feet, with more competition and an increase in prices on the horizon, as housing supply diminishes.

To make matters worse, there’s been no attainable solution presented by any level of government to increase housing inventory for Canadians. The situation has become so dire, that the latest housing gap projections from the Canadian Mortgage Housing Corporation, have already climbed from 3.5 million homes needed by 2030 to 5 million to correspond to the rise in population this year. Tackling this shortfall, however, is a complex problem that won’t be solved today or in the near future.

So what can we do to help home buyers and homeowners now?

There are several actionable steps we can take. Firstly, major media outlets must provide better coverage and full transparency on the factors influencing interest rates. We need to move the focus beyond the Bank of Canada rate announcements, which only impact variable-rate mortgages.

Secondly, we need better education. Nationwide awareness campaigns should be established to educate Canadians about the factors that influence interest rates, such as bond yields, and how these factors impact their ability to purchase or refinance. Collaborative efforts between local government, the real estate community, developers, financial institutions and mortgage brokers are essential in ensuring homeowners are being adequately educated on the options available to them. Information should also be more readily accessible on the solutions today such as the available government incentives, gifted down payments, the First Home Savings Account, non-B20-compliant products, extended rate holds, and 100% loan-to-value options, as well as the factors impacting their ability to qualify for a mortgage product today.

Lastly, it’s important to note that there are hundreds of lenders available today, offering tailored solutions to the challenges Canadians are facing. If you’re among those individuals waiting for a 25-basis-point drop from the Bank of Canada, I urge you to contact a mortgage professional to avoid missing the boat. Waiting for the Bank of Canada to make a rate cut may be preventing you from getting what you need — a home, lower mortgage payments, access to equity, or financial freedom.

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