Canadians are scrambling to get mortgage pre-approvals and rate holds before the era of low interest rates comes to an end, as some economists predict. Real estate and mortgage brokers say their clients are increasingly seeking ways to hold on to current rates because many housing markets like Toronto are facing heated conditions making it hard to keep purchase prices down.

Mortgage rates vary across banks, but Ratehub.ca shows the country’s top five banks are offering five-year fixed mortgages for as low as 2.62 per cent and as high as 2.94 per cent. Three-year fixed mortgages range from 2.49 to 3.49 per cent, while five-year variable mortgages vary between 1.40 and 1.75 per cent.

The Bank of Canada interest rate has sat at 0.25 per cent since March 2020, but the Bank of Canada has hinted it could rise as the country continues to climb out of the pandemic and loosen restrictions. A rise in both mortgage and interest rates would end an almost two-year period of rock-bottom borrowing costs.

The Toronto Real Estate Board said the average price of a home sold soared by almost 20 per cent to nearly $1.2 million in October, up from $968,535 in the same month last year. Rates hikes will make those purchases even more costly.

A one per cent increase in mortgage rates from current levels will cost an average new buyer $230 or 12 per cent more in additional monthly interest payments, CIBC Capital Markets analyst Benjamin Tal wrote in a Nov. 4 note to investors.

The Bank of Canada announced last week that while its current policy rate remains steady at 0.25 per cent, it will likely increase as early as the second quarter of next year and mortgage rates are bound to follow suit, particularly variable ones. “The variable rate is keyed off the chartered banks’ prime rate, and the prime rate is keyed off the Bank of Canada’s policy rate, so the variable rate would move up to the same degree,” he explained.

Fixed-rate mortgages are more of a wild card, as they aren’t impacted by the Bank of Canada’s actions in the same way. Still, there are signs of these fixed mortgage rates starting to increase as well. Recent fixed-rate mortgage holders won’t see any impact from higher rates until their renewals come due in the years ahead.

Current rates as of today per Outline Financial:
Variable rate: 1.25%
5-year fixed: 2.59%
3-year fixed: 2.34% and 1-year fixed: 2.19%