These financial institutions offer the best mortgage rates in Canada

Are you on the hunt for your dream home?

Compared to the record-high prices recorded in 2022, the housing market has cooled significantly, according to the latest data from the Canadian Real Estate Association (CREA).

With home prices somewhat lower, those who’ve waited for the past two years are looking for the best mortgage rates in Canada.

Below, I’ll explain how mortgage rates are determined, outline some of the best five-year mortgage rates, and discuss how mortgage terms and amortization work.

Let’s jump in!

What determines mortgage rates?

Mortgage rates in Canada are primarily influenced by the benchmark interest rates set by the Bank of Canada (BoC). The BoC’s primary interest rate, often referred to as the “overnight rate,” is the rate at which major financial institutions borrow and lend one-day (or “overnight”) funds among themselves.

When the BoC raises or lowers this rate, it typically leads to corresponding changes in interest rates offered to consumers, including those for mortgages, personal loans, small business loans, and even credit cards.

In addition to the BoC’s actions, other economic factors can also influence mortgage rates in Canada, including:

• Inflation
• Global events
• Financial crisis
• Major economic policy changes

What is the average house price in Canada?

In August 2023, the average home in Canada sold for $650,140, according to data from mortgage authority WOWA.

However, averages can be misleading as they account for the price of every price sold in every province and territory. With that in mind, here is the average home price in each major province as of August 2023:

• British Columbia: $958,424
• Alberta: $445,190
• Saskatchewan: $304,689
• Manitoba: $358,167
• Ontario: $832,376
• Quebec: $449,484
• Newfoundland and Labrador: $300,104
• New Brunswick: $307,910
• Prince Edward Island: $390,876
• Nova Scotia: $418,032

According to the WOWA report, Vancouver, BC, is currently the most expensive city to live in, with an average home price of $1.28 million.

7 Best mortgage rates in Canada

While it can be convenient to deal with your current bank or financial institution, you can save a lot of money in the long run by researching the best mortgage rate. Here are some of Canada’s lowest mortgage rates to help you start your search.

1. Meridian

• Five-year term mortgage rate: 5.84% fixed

Meridian Credit Union is Ontario’s largest credit union, offering a diverse range of financial services. Committed to community investment, it prioritizes member needs and upholds cooperative principles.

The financial institution offers flexible mortgage terms and payment options, including weekly, bi-weekly, monthly, and even bi-monthly payments. Most notably, Meridian allows customers to skip one payment once every year if they’re experiencing financial difficulty.

2. Marathon Mortgage

• Five-year term mortgage rate: 6.59% fixed

Marathon Mortgage specializes in residential mortgage financing. Known for competitive rates and personalized service, it supports borrowers with flexible mortgage rates and terms. Unlike other banks, Marathon Mortgage only offers mortgages. The bank’s website also features a handy mortgage calculator, which can help you do your preliminary calculations.

3. Equitable Bank

• Five-year term mortgage rate: 6.89% fixed

You may have heard of EQ Bank, one of Canada’s largest online banks that’s known for its great GIC rates, high-interest savings accounts, and other products. EQ Bank is owned by Equitable Bank, which specializes in mortgage lending and offers some very competitive rates.

4. Manulife

• Five-year term mortgage rate: 5.84% fixed

Manulife is another popular online bank that offers a full suite of consumer and commercial banking products, including home mortgages. The financial institution receives high consumer ratings, operates throughout the country, and could be a great option to help you finance your home.

The only downside is that you won’t be able to speak to the lender in person, as it’s an online-only bank.

5. Butler Mortgage

• Five-year term mortgage rate: 5.49% fixed

Like Marathon Mortgage, Butler Mortgage specializes in the home lending niche. Notably, Butler Mortgage offers to beat all other rates or a $500 “prize” if they’re unable to.

6. Pine

• Five-year term mortgage rate: 5.69% fixed

Pine isn’t a financial institution itself. Rather, it’s a mortgage company that helps consumers find the best rates by working with its network of lenders. In 2023, the Canadian Lenders Association nominated it for Mortgage Company of the Year.

7. TD Bank

• Five-year term mortgage rate: 6.54% fixed

TD Canada Trust is one of the country’s “big five” banks that offers everyday banking, credit cards, loans, and mortgages. One of the advantages of working with TD Bank is that it has a large network of branches, so you can speak to lenders in person.

How mortgage terms and amortization work

A mortgage term refers to the duration for which the mortgage rate and conditions are locked in, typically ranging from 6 months to 10 years in Canada. Borrowers can renew or refinance their mortgage with another lender at the end of a term.

Amortization is the length of time over which the entire mortgage debt will be repaid, often 25 years for first-time buyers.

Monthly payments are divided between interest and principal. As time progresses, a greater portion of the payment goes towards the principal. A longer amortization results in lower monthly payments but more interest paid over the mortgage’s lifespan.

Is it a good time to buy a house in Canada?

The Bank of Canada has paused rate hikes, so interest rates will likely remain similar until the end of the year.

However, it’s been a volatile few years for the Canadian housing market, so it’s difficult to say for sure whether now is the best time to buy. While home prices are down from the highs we saw in early to mid-2022, the average home price is still incrementally higher based on the past 12 months.

Keep on reading to see more articles about Vancouver’s real estate market!

Written for Daily Hive by Christopher Liew, a CFA Charterholder, former financial advisor, and the creator of Wealth Awesome.