Mortgage rates will stay near record-lows for 2021
Photo: James Bombales
Record-low mortgage rates are one of the major drivers of the huge rebound in home sales Canada has experienced since early summer.
And, with the country’s central bank committing to keeping its mortgage market-influencing interest rate low into at least 2023, there’s little chance that prospective homebuyers will see mortgage rates meaningfully rise next year.
That’s according to the latest Canadian Real Estate Association (CREA) resale housing forecast, that also predicted the national average home price will rise over nine percent in 2021 while purchasers will yet again break records for homebuying activity.
CREA’s forecast noted that with mortgage rates currently offered by lenders declining to record low levels, the Bank of Canada’s benchmark five-year rate has also been pushed down. Since this rate is used by major banks to qualify applicants under the federal mortgage stress test, more buyers have been able to qualify for mortgages.
In other words, not only have low mortgage rates pushed more qualified buyers to purchase homes this year, they’ve also increased the total number of buyers that can qualify for mortgages with big banks.
But even with the low mortgage rates on offer in 2021, CREA believes the current blistering pace of sales won’t last through the year. That said, it will still be a robust — and even record-setting — year for sales.
Despite the tumultuous spring months, homebuyers are on track to set a record for activity in 2020, with 544,413 homes projected to change hands by December 31st.
“On a monthly basis, sales are forecast to ease back to more typical levels throughout 2021,” CREA wrote in the report. “[H]owever, presuming there’s a more normal spring market in 2021, the year as a whole is expected to see more home sales than 2020.”
CREA is predicting 584,000 home sales for 2021, another record-setter for activity in a single year. What’s more is that figure could be even higher, but limited housing supply in Ontario is expected to temper the already potentially record-breaking sales performance.
“Ontario has seen strong demand for several years, particularly outside of Toronto, which has eroded active supply in the province,” CREA said in its report.
“The strength of demand, particularly for larger single-family properties, will drive the average price higher as potential buyers compete for the most desirable properties.”