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Five-year fixed mortgage interest rate declines

by Neil Sharma on 22 Jul 2019

Good news for borrowers—the interest rate used for mortgage qualification has fallen to 5.19%.

Previously at 5.34%, last week’s decrease marks the first decline since September 2016—the benchmark qualifying rate fell to 4.64% from 4.74%—however, it’s since been on the rise. Not only are global central banks looking to loosen lending policies, but Canada’s five-year bond yield, which impacts five-year fixed mortgages, has been falling all year.

According to, the interest rate decline will allow a homebuyer making $50,000 a year to afford a home that’s $4,000 more expensive, and someone earning $100,000 a year can afford $8,300 more.

That undoubtedly bodes well for homebuyers, end users and investors alike. In tandem with the Bank of Canada’s decision to hold the interest rate two weeks ago, this marks the most auspicious period for buyers in 19 months.

“The Bank of Canada is in wait-and-see mode,” Alicia MacDonald, principal economist at the Conference Board of Canada, told CREW. “We’re unlike to see the interest rate move on the variable side over the next few months.”

However, MacDonald added that there’s only so much good news to go around.

“The relatively rosy picture they painted of the domestic economy took a lot of talk about the increase rate decreases off the table here in Canada.”

There has been much speculation that the Bank of Canada will cut rates before the end of the year, largely because the Federal Reserve is expected to on July 31, but MacDonald doesn’t believe that’s likely. For one, the tariff war the United States and China are engaged in would need to escalate enough for headwinds to affect the Canadian economy.

“Unless we see those risks affect the domestic economy, we don’t think rates will decline this year,” she said. “Canada and the U.S., in terms of monetary policy, are sitting at fairly different stages. The real policy rate in the U.S. adjusted for inflation is 1.7%, but here in Canada it’s still 1.75% and inflation was 2%, so that’s a -0.25%. It’s still quite divergent in terms of the amount of monetary accommodation being provided by those Central banks. Even if the U.S. cuts rates by 25 or 50 basis points by the end of the year, the real interest rate here in Canada will be lower.”

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