Nerdy Insight: Despite the Bank of Canada’s decision to hold its overnight rate at 5% on October 25, elevated mortgage rates and general economic uncertainty are beginning to impact the Ontario housing market. Supply is building up, but the cost of borrowing is making home buying tough for people across the province.
Best mortgage rates in Ontario
Mortgage Type
Purchase Price
Down Payment
Rate Type
Province
Mortgage Term
Lender |
Lender Highlights |
Rate |
Payment |
Term |
|
|---|---|---|---|---|---|
MCAP |
|
5.44%
Fixed |
$2,747
Monthly |
4 yrs.
Term |
Explore Now |
MCAP |
|
5.44%
Fixed |
$2,747
Monthly |
5 yrs.
Term |
Explore Now |
MCAN |
|
5.79%
Fixed |
$2,842
Monthly |
3 yrs.
Term |
Explore Now |
B2B |
|
6.79%
Fixed |
$3,120
Monthly |
1 yrs.
Term |
Explore Now |
B2B |
|
5.59%
Fixed |
$2,788
Monthly |
5 yrs.
Term |
Explore Now |
Marathon Mortgage |
|
5.54%
Fixed |
$2,774
Monthly |
5 yrs.
Term |
Explore Now |
Disclaimer: These rates do not include taxes, fees, and insurance. Your actual rate and loan terms will be determined by the partner’s assessment of your creditworthiness and other factors. Any potential savings figures are estimates based on the information provided by you and our advertising partners. Mortgage Brokerage Licensed in ON #12984, BC #X301004, MB and AB. Homewise can pursue mortgage brokering activity in SK, NL, NS and NB.
Data source:
Best mortgage rates
Find the best mortgage rates in Canada.
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Posted mortgage rates from Canada’s Big Six banks
Rates updated: November 11, 2023
Bank |
3-Yr Fixed Rate |
5-Yr Fixed Rate |
5-Yr Variable Rate (Closed) |
5-Yr Variable Rate (Open) |
|---|---|---|---|---|
| 7.25% | 7.09% | 7.20% | 8.90% | |
| 7.24% | 7.09% | 7.20% | 10.50% | |
| 7.14% | 7.04% | 7.20% | N/A | |
| 7.30% | 7.14% | 7.30% | 10.50% | |
| 7.24% | 7.04% | 7.65% | 10.40% | |
| 7.14% | 7.04% | 7.35% | 8.35% |
Posted rates for closed mortgages with amortization under 25 years. Data source: Canada's major banks
The average mortgage rate in Ontario
Ontario doesn’t have a single average mortgage rate. Even if you could access all the current mortgage rates on offer, it wouldn’t be much help. That’s because any mortgage offer you receive is always specific to you. Lenders take into account multiple factors, such as credit score, the type of mortgage and the amount needed.
Think about the “average mortgage rate” the way you would Ontario’s average home price. It’s interesting data to have, but it’s not necessarily relevant to your own home buying journey.
Historical trend: New mortgage loans in Ontario
Ontario mortgage rate update: October 2023
In the last week of October, posted one-, three- and five-year fixed mortgage rates remained elevated at a number of major lenders, making mortgage shopping especially painful for Ontario home buyers.
According to the Bank of Canada, the average posted rate for a one-year, fixed-rate mortgage was an eye-watering 8.09% as of October 18. At an average rate of 7.14%, three-year fixed mortgage rates might be more affordable, but they require borrowers to pass the stress test at a brutal 9.14%.
Five-year terms remain the more affordable option, which puts mortgage shoppers in a real bind: A five-year term isn’t overly attractive if rates are expected decline in the next year or two, but shorter-term options may be too expensive for many borrowers to qualify for.
Don’t let your bank’s posted rates make you hyperventilate, though. They’re meant to be negotiated down, and should be closer to the rates found on our table above. Lenders were still offering five-year fixed rates below 6% on certain mortgage products as of October 25.
Even though the Bank of Canada held its overnight rate at 5% on October 25, variable mortgage rates remain painfully high. Since March 2022, variable-rate mortgage holders have seen their rates rise 10 times — and 475 basis points.
Variable rates won’t decline until the Bank is comfortable decreasing the overnight rate. That isn’t likely to happen until well into 2024.
The Financial Consumer Agency of Canada recently released a set of new guidelines for the country’s mortgage lenders to follow when dealing with borrowers whose finances have been pushed to the breaking point by higher interest rates. If you’re having trouble making your mortgage payments, or are having to make uncomfortable decisions to stay on top of your mortgage, reach out to your lender or mortgage broker immediately to find out what assistance or payment flexibility might be available to you.
Will mortgage rates go down in 2023?
Fixed mortgage rates forecast
Fixed rates are likely to keep rising before going down slightly by the end of the year, according to some real estate experts.
The Canadian bond market affects fixed mortgage rates, making them hard to predict. But bond yields can sometimes indicate which direction some fixed mortgage rates are heading. For example, declining yields on five-year government bonds often indicate that five-year fixed mortgage rates may soon decline.
Variable mortgage rates forecast
Variable mortgage rates stay in step with your bank’s prime rate. If rates fall, you’ll pay less in interest. But rising rates mean you’ll pay more.
Variable-rate mortgages are riskier than fixed-rate mortgages because they can change from month to month. So, if you’re looking for a mortgage, the variable rates you see are likely to be lower compared to fixed rates with otherwise comparable terms.
People who currently have variable-rate loans have watched their rates rise multiple times recently — a result of the Bank of Canada raising rates to combat stubborn inflation, and banks raising their prime rates in turn. The BoC likely won’t relent until inflation rates are closer to 2%. Variable rates will likely stay elevated into 2024.
Ontario October 2023 housing market snapshot
Ontario home prices rose slightly in September, with an average residential sale price of $851,756 according to the Ontario Real Estate Association. The average price in Toronto and Oakville-Milton, which accounts for about 40% of Ontario’s sales, was $1,131,994.
Compared with this time last year, sales are down while listings are up nearly 30%.
Ontario home prices and sales forecast
Home prices aren’t expected to move much through the rest of 2023, according to real estate company Royal LePage, as limited supply keeps prices stable despite rising interest rates.
Buyers sitting on the sidelines hoping for a fall in home prices may be disappointed. Experts at RE/MAX Canada expect prices to climb again when the Bank of Canada’s rate hikes appear to be over — largely due to a continued shortage of available housing.
Guide to Ontario mortgage rates
Types of lenders in Ontario
A lenders. Big banks and credit unions are A lenders and offer borrowers the best rates currently available. You’ll need a strong credit score before being offered a loan, and you’ll be expected to pass a stress test.
B lenders. Some smaller Canadian banks and mortgage investment corporations work with people who have poorer credit scores or limited credit history. Rates are higher as a result.
Types of mortgages in Ontario
Fixed-rate mortgages. The interest rate stays the same for the duration of the mortgage term in a fixed-rate mortgage, even if the market fluctuates. Fixed rates typically:
- Are higher than variable interest rates.
- Provide a greater sense of certainty. You can count on it remaining stable for the length of the mortgage term.
Variable-rate mortgages. Variable mortgage rates increase or decrease whenever your lender’s prime rate increases or decreases. Variable-rate mortgages typically have rates that:
- Can be lower than fixed rates at the time you apply for mortgages. Variable rates can save borrowers money over the length of their mortgage — but only if rates remain the same or fall.
- Can increase throughout a mortgage term. When interest rates go up, the monthly payment on a variable-rate mortgage can become more expensive.
» MORE: The difference between fixed- and variable-rate mortgages
Hybrid-rate mortgage. A portion of your mortgage is subject to a variable rate and another portion is at a fixed rate of interest. These mortgages:
- Can dampen the impact of fluctuating interest rates in a particularly turbulent or uncertain economy.
- Tend to be more difficult to transfer between lenders.
Insured vs. uninsured mortgages. If you buy a home for under $1 million, and your down payment is under 20%, you must insure your mortgage. Mortgage insurance adds to the cost of your loan. The cost of insurance equals a percentage of your mortgage, and the percentage depends on your down payment. The closer it is to 20%, the smaller your insurance payment is.
Homes worth $1 million or more require a down payment of at least 20%, so insurance is not required.
Short-term vs. long-term mortgages. Short-term mortgages last five years or less. Long-term mortgages last over five years. With a shorter mortgage, you’ll need to renew sooner, which can provide flexibility. Short-term mortgages often have lower interest rates than long-term mortgage rates.
Closed vs. open mortgages. The primary difference between closed and open mortgages is that you can pay off an open mortgage whenever you like and not pay a penalty. If you have a closed mortgage and make additional payments, you’ll generally be penalized.
Closed mortgages often offer better rates than open mortgages. But open rate mortgages may be a good option if you think you may be able to pay off your mortgage early.
» MORE: Understanding open and closed mortgages
How Ontario lenders determine mortgage rates
Ontario mortgage rates fluctuate constantly.
Two main economic factors affect mortgage rates:
- The Bank of Canada’s overnight rate, which influences variable rates.
- The bond market, which influences fixed rates.
Factors specific to you also affect the rates you’re offered. These include:
- Your credit score.
- Your income.
- Your total debts.
- The loan type you choose.
- The amount you’re borrowing.
- The term length and amortization period of your loan.
How to qualify for a lower mortgage rate in Ontario
Some factors behind rates are beyond your control, but there are steps you can take to possibly qualify for the best mortgage rates. For example, you can:
- Improve your credit score. A higher credit score generally results in better offers. Get a better score by eliminating existing debt and paying future bills in full and on time.
- Increase your income. It’s not always easy, but any additional income will improve your financial position. Lenders look at your income to assess your ability to afford a mortgage.
- Decrease your total debts. Pay down personal loans, student loans or other types of debts. Lenders consider your total debt load when determining the details of your loan.
- Consider all your options. See if adjusting the loan type, the term length or the amortization period of your loan could help.
Factors that affect mortgage affordability in Ontario
Mortgage term
The term is the length of time your mortgage contract is valid. In Canada, mortgage terms can run anywhere from six months to as long as 10 years.
Chances are that your mortgage will have multiple terms during the amortization period until you pay it off in full.
Amortization period
A mortgage’s amortization period is the time it will take to pay off the loan in full. In Canada, the most common amortization period is 25 years. If your down payment is less than 20%, you can’t have an amortization beyond 25 years.
If your down payment is greater than 20%, you may find some lenders willing to offer amortization periods of up to 35 years.
Why would you want a shorter amortization period? You’ll pay less interest overall and potentially save thousands of dollars. A shorter amortization period, however, will result in higher monthly payments.
Ontario land transfer tax
The tax you pay when buying a house is based on your home’s value.
You’ll pay:
- 0.5% on the first $55,000 of the home’s value.
- 1.0% on additional value that’s more than $55,000 and up to $250,000.
- 1.5% on additional value that’s more than $250,000 and up to $400,000.
- 2.0% on additional value that’s more than $400,000.
- 2.5% on additional value that’s more than $2,000,000 if the land contains one or two single-family residences.
How to compare mortgages from Ontario lenders
Compare the annual percentage rate (APR) — not the interest rate alone. The APR includes fees and closing costs the lender may charge in addition to the interest rate. A lender offering the lowest rate may actually have a higher APR due to those additional costs. Comparing APRs is the easiest way to see the complete cost of each offer.
Be sure to compare the same type of mortgage. For a comparison to be useful, the mortgages should have the same term, amortization period and payment frequency.
When looking for the best mortgage rates in Ontario, also consider:
- Mortgage type.
- Ease of application.
- Prepayment penalties.
- Customer service.
- Any other fees not included in the APR.
You can also compare mortgage rates in other provinces to get a sense of how the rate you’ve been offered in Ontario stacks up:
Mortgage shopping is about more than just the interest rate
A low mortgage rate is usually a primary objective for buyers, but getting the lowest rate doesn’t necessarily mean you’re getting the best mortgage for your needs.
For example, you might opt for a fixed rate, which has a higher rate than a variable rate, if you’re uncomfortable with the risk of rates rising.
Or, if you expect to come into a sizable sum of money soon (via an inheritance, for example), paying a higher rate for an open mortgage, which allows you to pay it off early without penalties, could be worth it.
Ontario first-time home buyer programs
Land Transfer Tax Refunds for First-Time Homebuyers. If this is your first home, you can refund up to $4,000 of land transfer taxes.
Areas including Waterloo, the County of Simcoe, Kingston and Chatham-Kent have home buyer assistance programs that can keep costs down.
Frequently asked questions about Ontario mortgage rates
As of August 2023, you could still find fixed mortgage rates for less than 5.5% and variable mortgage rates for under 6.5% for a home purchase price of $400,000 and a down payment of 10%. The rate offers you receive depend on factors like your credit
Ontario First-Time Home Buyer Guide
First-time home buyers in Ontario should prepare for a competitive market, get their finances in order, and explore various grants and assistance programs that can improve affordability.
Clay Jarvis
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