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B.C. mortgage rate update: December 2024
The Bank of Canada delivered an early Christmas present for B.C.’s variable-rate mortgage fans on December 11, when it reduced its overnight rate by 50 basis points. When the rate cut is absorbed by lenders, variable rates should decrease by 0.5%.
That will bring the lowest advertised variable rates down to around 4.3% at some mortgage brokerages. Variable rates remain closer to 5% at the country’s biggest banks. Another rate cut could be in the cards for January, when the Bank is scheduled to make its next overnight rate announcement.
Fixed rates aren’t quite as exciting these days. Even though bond yields, which determine fixed mortgage rates, have cratered over the past several weeks, lenders haven’t lowered their fixed rates in response. Canada’s lowest advertised five-year fixed rates are currently around 4.15%.
Shorter-term fixed rates, the option of choice among many recent home buyers, will cost you a little more. (That’s the unfortunate result of higher demand.) Two-year terms might cost 4.89% or more, while one-year terms are closer to 6%.
Historical trend: New mortgage loans in B.C.
The average mortgage rate in B.C.
There’s no single average for mortgage rates in British Columbia. Even if you had access to all the current mortgage rates being offered by lenders in B.C., it wouldn’t be much help when you’re mortgage shopping. That’s because the mortgage offer you receive is always specific to you and takes into account multiple factors like your credit score, the type of mortgage you want and the amount you need to borrow.
Think about the “average mortgage rate” the way you would B.C.’s average home price. It’s interesting data to have, but it’s not necessarily relevant to your own home buying journey.
2024 B.C. mortgage rate forecast
Variable mortgage rates
After the Bank of Canada’s fifth consecutive overnight rate cut on December 11, 2024, variable mortgage rates were down 1.75% since June. That’s a lot of action from a central bank with a conservative reputation.
The Bank likely won’t be as aggressive in 2025, as it has to wait for its most recent cuts to work their way through the economy. The overnight rate might decrease by another 50 basis points in the first half of 2025, which would bring variable mortgage rates down by another 0.5%.
Fixed mortgage rates
Because they’re determined by the government bond market, which is driven by investors’ decisions, fixed mortgage rates can be difficult to project over the long-term.
The mortgage brokers NerdWallet spoke to at the end of 2024 all expect fixed mortgage rates to remain relatively static for the next several months. That assumption, however, flies in the face of evidence from the government bond market. Bond yields, which determine fixed mortgage rates, cratered for three weeks straight starting on November 21. When yields fall consistently, it gives lenders the wiggle room to lower their fixed rates.
So, fixed rates could fall to begin the year, but lenders might keep them at current levels for a strategic reason: Lower fixed rates might entice home buyers away from the more expensive variable-rate mortgages they’ve been gobbling up to end 2024.
Average home prices in B.C.
The average residential home price in B.C. was $979,221 in November, which was 1.7% higher compared to November 2023, according to the British Columbia Real Estate Association. The number of homes changing hands jumped 25.7%% compared to last November. In a press release, BCREA Chief Economist Brendon Ogmundson wrote, “The surge in activity this fall sets up 2025 for a much stronger start than we’ve seen in the last two years.”
Average November prices in major B.C. markets included:
- Greater Vancouver: $1,276,716.
- Vancouver Island: $728,551.
- Fraser Valley: $1,033,199.
- Victoria: $942,725.
B.C. home sales and price forecast
Many Canadians wonder how the Bank of Canada’s rate cuts will affect the housing market. Will it compel buyers who have been cautiously watching from the sidelines, or will they continue to wait, hoping that rate cuts are just getting started? These are the questions real estate experts — and home buyers — will be watching through the end of 2024.
A report released by real estate company Royal LePage forecasts home prices increasing 9% in the last three months of 2024 compared to the same period in 2023.[1] A report from the Canadian Real Estate Association stated that listings are up this summer compared to 2023 but still below historical averages.
Vancouver home prices increased 3.9% in the second quarter of 2024 compared to the year before.
B.C. first-time home buyer programs
If you’re a first-time home buyer in B.C., you may qualify for programs, including:
First-Time Home Buyers’ Program
This program can cut up to $8,000 from the land transfer tax owed on houses valued at $500,000 or less.[2]
Home Owner Grant
Reduce your property taxes if the home is your principal residence. This program isn’t limited to only first-time home buyers.[3]
Newly Built Home Exemption
The exemption reduces property transfer taxes on newly built homes worth less than $800,000.[4]
Land transfer taxes in B.C.
The B.C. land transfer tax is a tax the purchaser of a home pays.[5] The amount you pay is based on the value of your home, and the tiered-rate system means more expensive homes result in a higher rate. You’ll pay:
- 1% for the first $200,000 of your home’s value.
- 2% for any amount between $200,001 and $2,000,000.
- 3% for any amount greater than $2,000,000
The above rates cover the most common transactions. However, you’ll face different rates under some circumstances, including if:
- You’re a foreign national.
- The home is worth more than $3 million.
- The property includes a farm.
Guide to B.C. mortgage rates
Types of lenders in B.C.
- Large chartered banks such as Scotiabank, RBC and TD.
- Credit unions.
- B lenders that work with borrowers with lower credit scores, such as MCAN and Equitable Bank.
- Private lenders, who typically deal with borrowers in need of short-term funding.
Types of mortgages in B.C.
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.
Hybrid-rate mortgage
One portion of your mortgage is subject to a variable rate and the other 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 make a down payment of less than 20% on a home costing under $1 million, you must insure your mortgage. Mortgage insurance adds to the cost of your loan. You pay a percentage of your mortgage amount, 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 term, you’ll need to renew your B.C. mortgage sooner, which can provide flexibility. Short-term mortgages often have lower interest rates than long-term mortgage rates.
Closed vs. open mortgages
The main 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 make additional payments on a closed mortgage, 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.
How B.C. lenders determine mortgage rates
The mortgage rate you’re offered by a lender in British Columbia will be based on two primary factors; one based on the state of the economy and one based on your financial situation.
Economic factors
Variable mortgage rates are influenced by the Bank of Canada’s overnight rate. When the overnight rate increases or decreases, a lender’s prime rate follows suit. Variable mortgage rates are based on a lender’s prime rate, so as the prime rate rises or falls, so do variable rates.
Fixed mortgage rates are determined by activity in the government bond market, particularly the yields on one-, three- and five-year bonds. Fixed mortgage rates follow the movement of those yields.
Your financial situation
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.
Lenders look for signs of risk when assessing these aspects of your finances. The riskier they perceive you to be as a borrower, the higher the rate they’re likely to offer you.
How to qualify for a lower mortgage rate in B.C.
Some factors behind rates are beyond your control, but there are steps you can take to encourage lenders to offer you the best mortgage rates. For example, you can:
- Improve your credit score. To start, pay down any outstanding debt and pay off every bill in full.
- Increase your income. This isn’t always easy, but any additional income will improve your financial position.
- Decrease your total debts. Pay down any personal loans, student loans or other types of debts.
- 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 B.C.
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.
Frequently asked questions for B.C. mortgage rates
As of December 2024, some brokers were offering fixed rates for around 4% and variable rates for around 4.5%. The rate offers you receive depend on factors like your credit score, total debt level and income, and whether you apply at a major bank or through a mortgage broker.
Mortgage rates are expected to decrease somewhat in the first half of 2025. The Bank of Canada might reduce its overnight rate another two times, which would lower variable mortgage rates by 0.5% versus today’s levels. Fixed mortgage rates will likely continue hovering between 4% and 4.5%. for much of next year.
Article Sources
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Royal LePage, “Home Prices and Forecasts,” accessed September 5, 2024.
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Government of British Columbia, “First time home buyers' program,” accessed September 5, 2024.
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Government of British Columbia, “Home owner grant,” accessed September 5, 2024.
-
Government of British Columbia, “Newly built home exemption,” accessed September 5, 2024.
-
Government of British Columbia, “Property transfer tax,” accessed September 5, 2024.
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