CityNews – Mortgage Rates & Predictions | December 4th, 2023

Clinton Wilkins joins Rob Snow on CityNews to discuss the state of mortgage rates ahead of the next Bank Of Canada Update. They discuss where the rates are at now, rate options, high-ratio mortgages and predictions for next year.

Rob Snow 00:00
As we get ready to talk mortgage rates ahead of this announcement on interest rates from the Bank of Canada, no move expected on Wednesday, but it will be interesting to know what the Bank of Canada sees ahead, Clinton Wilkins joins us now. Clinton Wilkins mortgage team Centum Home Lenders in Dartmouth Nova Scotia. Hi there. Welcome back.

Clinton Wilkins 00:22
Thanks for having me.

Will rates start to soften?

Rob Snow 00:24
And I’m guessing that you’re not expecting any earth-shattering news from the Bank of Canada on Wednesday, Clinton.

Clinton Wilkins 00:32
I think they’re gonna hold steady. But I think every Canadian, every economist is already waiting for the day that the rates are going to start softening. And I think they’re going to really start softening in the near future. I think originally, the economists were thinking that things would start softening. you know, midway through next year, we’re talking maybe June, July, we’re gonna start seeing the rates go down. But there certainly is some downward pressure now. And I think maybe even by the springtime, we might see some signs of softening. Obviously some good news around inflation that had been announced. And interestingly enough, with the bond yields last week, certainly some pressure on the fixed rate mortgage products as well, we’re seeing some softening. And I think we’re gonna see rates lower in the very near future.

Rob Snow 01:15
Okay, so, you know, let’s talk about some of the the rates that people can expect if they’re out shopping for a mortgage or up for renewal on their current mortgage, give me a sample of some of the some of the rates that are on offer right now.

Current Mortgage rates and options

Clinton Wilkins 01:31
I think all the rates are currently high. And I think that’s what you really need to think about. You know, most commonly, Canadians take a five year fixed, but that certainly wouldn’t be what I would be recommending right now, if someone can qualify or have the risk appetite to take anything else. You know, with a five-year fixed, it will be the lowest rate. So I think that’s what we need to remember. And you’ll be looking at rates anywhere from a 5.5 to low 6% range. There certainly has been an increase of popularity in variable rate mortgages even the last few weeks, as you know, we’ve had more, you know, positivity thinking about having rates go down. So variable rates certainly have taken uptick and certainly more popular than they were even a few months ago. So the one thing that we’re always telling customers is, if we’re expecting the rates to go down in the future, we need to think about either doing a shorter term fixed, and I would say right now a three-year fix is the most popular. Or if you do have the stomach, I think variable rate will treat you very, very well in the future, but you just need to have that appetite to be able to hold on for these rate decreases to come.

Rob Snow 02:36
So it’s interesting that people are kind of hedging, right, with three year being your most popular product. That’s very interesting.

Clinton Wilkins 02:45
They’re certainly hedging the bets, I would agree with you 100%. But the one thing that you need to remember, as a consumer, a three-year fixed is going to be more expensive. And, you know, the banks have this figured out, we know where the popularity lies. And, you know, historically, that five-year is going to be the most popular, and it’s the lowest rate. And I think many consumers are tempted to have the lowest rate product. But we need to remember, lower is not always better. And you need to really think about what your situation is. So many Canadians are breaking their mortgage early. And as you can imagine, if you’re breaking mortgage, let’s say even in a couple of years and you’re breaking a five-year fixed, you could have a very significant penalty to get out of that term early.

High ratio mortgages vs low ratio mortgages

Rob Snow 03:31
Okay, what about high-ratio mortgages versus low ratio mortgages? What are you seeing there?

Clinton Wilkins 03:39
In Atlantic Canada and the prairies, certainly a lot of high-ratio mortgages happening. So that would be when you buy a home and put down less than 20% You’d need to get the insurance from the Canadian Mortgage Housing Corporation, Sagent or Canada Guarantee. Maximum amortization would be 25 years and are financing owner occupied properties or second homes. We’re also seeing a lot of popularity with mortgages that are being financed at 65% of the property value, this might be on a renewal or on a purchase, again, with a 25-year amortization. But lenders can get what we call an insurable response. So you’re not paying this high ratio insurance to CMHC. But the lender can then, you know, access things like the Canadian Mortgage Bond and still get very aggressive rates. And oftentimes, the rates are as good on an insurable product as they would be uninsured. And just to give you a little bit of an idea about what the rates look like, when I talk about fixed rates on a five-year at 5.5%, that is on a high ratio, insured or uninsurable response. If you want to get a conventional mortgage, we’re talking rates typically above 6%. So there certainly is a spread between a normal conventional mortgage and you know, a high ratio or insurable mortgage.

Rob Snow 04:55
Okay. And just to kind of tie a bow on this You would expect mortgage rates to begin falling when?

Rates to soften in the spring and summer of 2024

Clinton Wilkins 05:05
I’m seeing some softening this week, just due to what’s going on with the bonds and how the bonds have softened. We certainly are seeing some fixed rates that are lower this week than they were last week. I think for us to really see some big decreases, we’re likely looking into spring and summer next year.

Rob Snow 05:22
Okay, okay. Very interesting. Thank you so much for your expert insight. Really appreciate it again, Clinton.

Clinton Wilkins 05:30
Thanks for having me. And we’re really going to be staying tuned here Wednesday for the Bank of Canada announcement. I know a lot of people are kind of waiting with bated breath. I think obviously being in an environment that even the rate is maintained. People can start planning obviously for the new year.

Rob Snow 05:44
Thank you again, Clinton Wilkins. The Clinton Wilkins mortgage team Centum home lenders in Dartmouth