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One of the good things to come from the pandemic: historically-low interest rates and HUGE savings for today’s home Buyers.

In March 2020, the Bank of Canada took swift action to lower the cost of borrowing and cut their overnight target rate twice, to 0.25%. To help spur the economy in these uncertain times, the rate has remained unchanged.

In response, Canadian banks lowered their prime rates – the rate they use to set interest rates on mortgages and loans. Here’s a look at how prime rates have changed over the last 20 years:

Historical Prime Interest Rates – Canada

Actual Mortgage Rates Are Even Lower

In order to incentivize borrowers, banks have been offering unbelievably-low discounted rates. As of writing (September 13, 2020, home Buyers can score these rates:

  • Royal Bank of Canada: 2.29% for a 5-year fixed mortgage; Prime-0.35% for a variable-rate mortgage
  • TD Bank: 1.99% for a 5-year fixed mortgage; Prime-0.55% for a variable rate mortgage
  • Alternative lenders: some are charging as low as 1.69% for a 5-year fixed-rate mortgage and 1.6% for the variable rate.

So What Do Low Interest Rates Mean for Buyers?

Historically low interest rates are one of the reasons the GTA real estate market has been so active during the pandemic- it’s way cheaper to buy a home now than it was earlier this year.

Here’s How Much $$ You’re Saving

Example: You’re buying a $1,000,000 house, with a 20% downpayment, and want a 5-year mortgage with 25-year amortization:

Variable-Rate Mortgage

January 2020September 2020Difference
Interest Rate3.1%1.9%
Monthly Payment$3,827$3,349$478/month

Fixed-Rate Mortgage

January 2020September 2020Difference
Interest Rate2.99%1.99%
Monthly Payment$3,782$3,384$398/month

What could you do with an extra $400 or $500 a month?

Current interest rates present a HUGE opportunity for first-time Buyers looking to break into the market and upsizers seeking bigger homes or better neighbourhoods. If you’re thinking of buying a home this fall, make sure to talk to your bank or a mortgage broker ASAP to lock in these super-low rates.

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