Fixed mortgage rates have been dropping, and dropping fast!

Almost too fast to keep up, as every day there is at least one lender dropping rates.  Each week, rates across the board have been trending lower and lower and have been doing so since early February. In January, the lowest 5-year fixed rate was 3.49%. They are now as low as 3.04% (for insured mortgages).

5 year fixed rates at the big banks have been slower to fall, however, there are currently promotions on for as low as 3.24%.  By the end of April, I would expect most 5 year fixed rates to be back under 3%.  There is no indication of when this downward slide will level off, but there is definitely still room for rates to slide further, so we could see fixed rates pushed much lower than they are right now.

Why Are Rates Dropping

As our economy moves closer to a recession, bond yields have been falling, which in turn directly influences the movement of fixed rates.  The bond yields have been dropping rapidly since the beginning of November 2018, and continue to fall.  Mortgage lenders were resistant to drop rates at that time and were holding off on cuts, hanging on to higher profits for as long as they could.  They eventually had to succumb to the falling bond yields, which is what is happening right now.  This is of course great news for anyone purchasing a home or anyone with a mortgage renewal coming up.

The bond yields have now reached their lowest level since January 2017.  At that time, 5 year fixed rates were available as low s 2.34%.  When you compare that with today’s lowest 5-year fixed at 3.04%, you can see just how much more room there is for rates to drop….. and bond yields have not finished tumbling.  This may result in significantly lower rates by summer. 

How This Affects Variable Rates

Note that bond yields influence fixed mortgage rates only and do not affect variable rate mortgages.  Back in the fall, it had been predicted that prime rate would increase as much as three more times by the end of 2019. This goes to show you just how quickly things can change in the mortgage world, as the outlook has since done a complete 180.  Not only will there not be any increases to prime rate, but it’s also very likely that it will drop at least one time before the end of this year. Then possibly again in 2020.

Right now, there are discounts as low as prime -1.40% (2.55%) for high ratio mortgages and as low as prime -1.30% (2.65%) for conventional, non-insured mortgages, providing purchase price is under $1 million and equity is 30% or greater. Once the Bank of Canada cuts prime rate, it’s likely we will see lenders cut their discounts. So even if prime rate drops, it’s possible we could see variable rate mortgages increase depending on how much lenders reduce their discounts off prime. The choice between fixed and variable still remains a personal choice, however, with the spread narrowing between the two options, more are starting to opt for fixed-rate mortgages. Variable, however, should not be discredited given the downward projection of our economy.


Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank – How to Win The Mortgage Game in Canada, and has ranked as one of the top 75 mortgage brokers in Canada since 2016. He was a finalist for Mortgage Broker of the Year in 2018, and can be seen as the exclusive mortgage broker on season two of TV’s Top Million Dollar Agent.