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Ontario mortgage rate update: December 2024
The Bank of Canada delivered an early Christmas present for Ontario’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%.
What’s a good mortgage rate in Ontario right now?
As of December 2024, you can find fixed mortgage rates for below 4.2% and variable mortgage rates for less than 4.4% in Ontario. The rate you’re offered will ultimately depend on factors like your credit score, total debt level and income, and whether you apply for your mortgage with a Big Six bank or through a mortgage broker.
Ontario mortgage rate forecast: Will rates keep going down in 2025?
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.
Ontario housing market update
Ontario home sales continued to rise in November. Sales increased 31.3% year-over-year, according to the Ontario Real Estate Association. Despite that increase, sales figures were still below the five- and 10-year monthly averages.
The average monthly sale price in the province, $868,067, was up 4.7% from one year ago. The average price in the Greater Toronto Area, $1,122,162, was up 2.4% year-over-year.
Ontario home sales and price forecast
Many Ontarians wonder how lower rates will affect the housing market. Will better rates compel more buyers, or will lower rates be offset by challenges such as elevated prices — up nearly 10% in Ontario since October 2023? 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. The organization said it “has scaled back” its forecast for 2024 and 2025.[2]
Spring home sales in the Toronto area were low, which kept prices flat according to the Royal LePage report. The report suggested the market will pick up at the end of the year, and the projected 10% increase in prices compared to 2023 would be the biggest price jump among major markets in Canada.
Ontario first-time home buyer programs
Getting a good mortgage rate is key to controlling your monthly mortgage payment. But there’s also a need for upfront cash to fund a down payment and closing costs. First-time home buyer programs may be able to help reduce some of these upfront costs.
Land transfer tax refund
When buying your first home in Ontario, you can claim a refund up to $4,000 of land transfer taxes.[3] If you’re a first-time home buyer in Toronto, you may qualify for a $4,475 refund on your municipal land transfer tax.[4]
Other first-time home buyer programs
Areas including Waterloo, the County of Simcoe, Kingston and Chatham-Kent have home buyer assistance programs that can keep costs down.
Ontario land transfer taxes
Factor in the land transfer tax when buying a house in Ontario.[5] The amount you’re charged 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.
And if you’re buying in Toronto, you’ll pay a municipal land transfer tax as well.[6]
Guide to Ontario mortgage rates
Types of lenders in Ontario
Mortgage lenders in Ontario tend to fall into four categories, which include:
- Large chartered banks such as Scotiabank, RBC and TD.
- Credit unions such as Northern Credit Union and Alterna Savings.
- 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 Ontario
There’s more to getting a mortgage than looking for the lowest rate.
You’ll need to choose whether to lock in your rate for the duration of your mortgage.
| Fixed-rate mortgages | Variable-rate mortgages | Hybrid-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. Historically higher rates than variable mortgages. | Variable mortgage rates increase or decrease whenever your lender’s prime rate increases or decreases. Historically lower than a fixed-rate mortgage, but it’s also riskier. | A portion of your mortgage is subject to a variable rate and another portion is at a fixed rate of interest. Relatively uncommon. |
The size of your down payment determines whether you’ll be shopping for insured rates or uninsured rates.
| Insured mortgage | Uninsured mortgage |
| If your down payment is under 20%, you must insure your mortgage. Mortgage insurance adds to the cost of your loan. The closer your down payment is to 20%, the smaller your insurance payment is. Homes over $1.5 million require a down payment of at least 20% (homes purchased before December 15, 2024, have a $1 million threshold). | If your down payment is at least 20%, you won’t need insurance. When you’re looking for mortgages you may notice that rates for uninsured mortgages are usually higher than insured mortgages. Don’t worry — after taking into consideration the cost of mortgage insurance, uninsured mortgages are cheaper. |
You’ll also need to choose between an open and a closed mortgage.
| Closed mortgage | Open mortgage |
| Closed mortgages often offer better rates than open mortgages. You can make extra mortgage payments up to a limit without penalty. | You can make all the extra payments you want with an open mortgage. But you’ll pay a higher rate. |
How Ontario lenders determine mortgage rates
The mortgage rate you’re offered in Ontario will be based on two primary factors; the state of the economy and 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.
Calculators to inform your home buying decisions
How to qualify for the best 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, including:
- 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.
Frequently asked questions about Ontario mortgage rates
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 August 28, 2024.
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The Canadian Real Estate Association, “CREA Scales Back Resale Housing Market Forecast,” accessed August 28, 2024.
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Government of Ontario, “Land Transfer Tax Refunds for First-Time Homebuyers,” accessed August 28, 2024.
-
City of Toronto, “Municipal Land Transfer Tax (MLTT) Rebate Opportunities,” accessed August 28, 2024.
-
Government of Ontario, “Land Transfer Tax,” accessed August 28, 2024.
-
City of Toronto, “Municipal Land Transfer Tax (MLTT),” accessed August 28, 2024.
About the Author
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