Mortgage trends to watch closely this year

Mortgage trends to watch closely this year

From a variable rate revival to the emergence of six-month mortgages, these are the trends that will shape the industry

The problem is, most folks aren’t exactly flipping through amortization tables on their coffee breaks. The average borrower gets a home loan only every 3.8 years or so, which is just enough time to forget what you learned while researching your last mortgage — if you had one at all.

That’s where this column comes in, it’s about helping people avoid expensive mistakes.

What’s an expensive mortgage mistake?

Well, borrowers constantly lose money for all sorts of reasons:

  • Picking a term with a lower probability of interest savings
  • Botching their rate negotiations
  • Paying unexpected fees
  • Getting sucked dry by onerous prepayment penalties
  • Overlooking the value of refinancing flexibility
  • Ignoring the opportunity cost of a shorter amortization
  • Handcuffing themselves to less portable mortgages
  • Relying on advice biased by compensation
  • Waiting years to save for a down payment while home prices run away from them.

This year’s mortgage market promises more suspense than the final outcome of the Canucks season.

Here are some things to watch closely as the year unfolds..

 Rate cuts or bust

Never before has the Bank of Canada rammed interest rates higher — on a proportionate basis — than it did from March 2022 to July 2023. The benchmark prime rate almost doubled, which has never happened in a single rate cycle.

The good news is, barring another unexpected inflation shock, today’s 7.20 per cent prime rate is on borrowed time. Consumers can’t endure a policy rate at 23-year highs for long. That’s why central banks and the investors who bet on rate direction all project a rate rollback by the second half of this year.

 A shift back to variable

 Variable-rate mortgages fell out of favour over the past 18 months, with their share of new mortgages plunging as low as five per cent last July, from a high of 57 per cent in January 2022. But once central banks signal imminent rate cuts and the discounts on uninsured variable-rate mortgages improve, more borrowers will float their rates. This shift could happen as early as spring or as late as fall or beyond.


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