Canadian Mortgage Market 2024: The Pivot Year

This review covers 2024. Figures are as of the dates shown and may have changed since. Check current information before making a decision.

For two years, Canadian mortgage borrowers waited for relief. In 2024, it arrived as a series of rate cuts that, by December, had moved the Bank of Canada's overnight rate from 5.00% to 3.25%. Five cuts. One hundred and seventy-five basis points. The direction was clear, even if the pace was not.1

But the year was about more than rates. Many fixed-rate mortgages reached renewal. The government raised the insured mortgage price cap to $1.5 million. First-time buyers gained access to 30-year amortizations on insured mortgages. And the stress test was removed at renewal for some borrowers switching lenders.7

Five Cuts: The Easing Cycle Arrives

The Bank of Canada delivered its first cut of the cycle on June 5, reducing the overnight rate by 25 basis points to 4.75%. The pace then changed, with two cuts of 50 basis points in the autumn:2

Headline inflation was 1.9% in the twelve months to November 2024, after 2.0% in October. It had peaked at 8.1% in June 2022.6

For variable-rate borrowers, the rate fell with each cut, because banks set prime from the policy rate. Whether the monthly payment also fell depends on the mortgage. Many variable mortgages keep the same payment when the rate drops, so more of each payment goes to principal.

The Renewal Wave

In its May 2024 Financial Stability Report, the Bank of Canada noted that about half of all outstanding mortgages were held by borrowers whose payments were fixed for five years and who had yet to face higher rates. Those households were expected to see larger payment increases than borrowers who had already renewed.8

Payment changes at renewal depend on the rate you had before and the rate you are offered now. Check your own numbers with your lender or a licensed mortgage professional before you sign a renewal.

Policy Changes That Reshaped the Market

Several policy changes took effect in late 2024:

30-Year Amortizations for First-Time Buyers

From December 15, 2024, 30-year amortizations became available to first-time buyers and buyers of new builds on insured mortgages, up from the 25-year maximum.7 On a $500,000 mortgage at 5%, a 30-year amortization lowers the monthly payment by about $240 compared with 25 years (semi-annual compounding). The trade-off is more interest paid over the life of the loan. For some buyers, the lower payment may help them qualify.

Insured Mortgage Cap Raised to $1.5 Million

From December 15, 2024, the insured mortgage purchase price cap rose from $1 million to $1.5 million.7 Buyers of homes between $1 million and $1.5 million can use an insured mortgage, with a minimum down payment of 5% on the first $500,000 and 10% above that. Before the change, a home above $1 million needed an uninsured mortgage and at least 20% down. Program rules apply.

Stress Test Removed for Some Lender Switches

From November 21, 2024, OSFI removed the mortgage stress test at renewal for uninsured mortgage holders switching from one federally regulated lender to another, provided the mortgage amount and amortization do not change.7 The new lender still reviews the application. The change does not apply to a switch that increases the amount borrowed.

Housing Market Recovery Begins

Lower rates were expected to support home sales and prices through the second half of 2024. This review does not restate regional sales or price figures. For the figures for a given market and month, check the Canadian Real Estate Association or your local real estate board.

Rates at the End of 2024

As of December 11, 2024, the Bank of Canada's target for the overnight rate was 3.25%, down from 5.00% at the start of 2024.5 Lender mortgage rates vary by product, term and borrower, and are not quoted in this article. Get current rates from a licensed mortgage professional.

Fixed and variable rates each suit different borrowers. The choice depends on your budget, your tolerance for payment changes and your plans for the property, so review it with a licensed adviser.

What This Could Mean for a Borrower*

Illustrative renewal example. A homeowner has a $520,000 mortgage that was originally fixed at 2.89% in 2019 and comes up for renewal in September 2024. The bank offers 5.19% fixed for five years. A broker compares that offer with a monoline lender offering 4.69% for the same term. On the assumptions stated here (25 years of amortization remaining, semi-annual compounding), the lower rate reduces the monthly payment by about $148. Because the amount and amortization do not change, the switch falls under the November 2024 rule, so the stress test does not apply. The new lender still reviews the application. A lower payment is not the same as a lower total cost. Fees, prepayment terms and the rest of the term also matter.

* Real names have been replaced with fictional names. This case is illustrative.

Looking Ahead

This article was written about 2024. It does not forecast future rate decisions, and later Bank of Canada decisions are not reflected here.

• Check current policy. The Bank of Canada publishes each rate decision. Use its current decisions page for the latest overnight rate.
• Renewals continue. Borrowers with fixed mortgages renew in later years, so the payment effect of a renewal depends on the rate then in force.

If you have a renewal or purchase coming up, start early and compare your options. A licensed mortgage professional can review your situation.