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Exploring Canadian Mortgage Trends in 2024

As we step into a new year, the prospect of a fresh start and growth is always invigorating. For many Canadians, this could mean reevaluating their housing situation. Some aspire to become first-time homeowners in 2024 while existing homeowners might be contemplating upgrades or downsizing. However, despite having goals in mind, the real estate market may have its own plans.

Interest rates are notably higher than they were during the peak of the COVID-19 pandemic. These elevated rates might slow down potential homebuyers in their decision-making process.

Key Mortgage Trends for 2024

The surge in interest rates during 2023 might have caught some by surprise. However, these increases align with the trends in bond yields, reflecting the returns investors earn on their bond investments. Observing the patterns of bond yields over the past three years reveals a correlation with interest rates.

At the onset of the pandemic, the economy experienced a near shutdown, causing bond yields to drop ahead of lower interest rates. Canadians seized this opportunity to secure mortgages at exceptionally low rates, some even below 2%. However, by late 2021 and early 2022, bond yields were on the rise again as inflation climbed.

In response to the increasing bond yields, financial institutions in Canada raised their fixed mortgage rates. Although fixed mortgages were slightly lower at the beginning of 2023 due to reduced bond yields, the pause in rate hikes by the Bank of Canada over the summer led to a state of dormancy in the buyer’s market. To comprehend the dynamics of the mortgage stress test and predict future mortgage rates, one must closely monitor the bond market.

Understanding the Mortgage Stress Test

When interest rates were low, being tested at 2% higher might not have dissuaded buyers. However, with higher rates, buyers are now subjected to a stress test at nearly 8%, a considerable threshold for many potential buyers.

Presently, it’s challenging for most borrowers to pass the stress test, contributing to the current market standstill.

Looking Ahead

While bond yields serve as an indicator, the crux lies in inflation and interest rates. In December, the Bank of Canada announced it would maintain the benchmark interest rate at 5%, with expectations of the first rate cut in the spring of 2024. Although bond yields are decreasing, substantial changes in Canadian mortgages will likely hinge on a reduction in inflation.

Encouragingly, for buyers ready to take the plunge, inventory has increased in most markets. This could present an advantage, as purchasing in a market with higher inventory and less competition may provide greater negotiating power. As always, buyers should seek professional guidance to make informed decisions aligned with their unique situations. You are cordially invited to explore my website,, where you can delve into captivating blogs on real estate topics that may pique your interest. Kindly follow the link provided:

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