Still Waiting for 1% Mortgage Rates? Here’s Why They’re Gone for Good

What’s Changed Since the Pandemic?

Remember those record-low mortgage rates in 2020 and 2021? Some of us locked in 5-year fixed terms under 2%. But if you’ve been waiting for those deals to come back, it might be time to adjust expectations.

Ultra-low interest rates were a response to a global emergency. Central banks, including the Bank of Canada, slashed rates to near zero to keep the economy afloat during COVID-19 lockdowns. Now that the economy has stabilized and inflation is no longer transitory, those emergency measures have ended. 

Why Rates Aren’t Expected to Drop That Low Again

According to the latest insights from Canadian Mortgage Trends and other economists, there are a few major reasons we’re unlikely to see sub-2% mortgage rates return:

• Persistent Inflation Pressures: Even with inflation cooling off, it’s still above the Bank of Canada’s 2% target.

• Global Economic Shifts: Higher oil prices, supply chain realignments, and geopolitical tensions all contribute to a more expensive world.

• Strong Employment Numbers: Canada’s job market remains resilient, which gives the Bank of Canada little incentive to aggressively cut rates.

• Government Spending: Fiscal policies like housing initiatives and infrastructure spending add upward pressure to inflation, keeping rates higher longer.

So, What Does This Mean for Canadian Homeowners?

If you’re renewing your mortgage, shopping for your first home, or exploring investment properties, here’s how you can respond to this new normal:

• Adjust Budget Expectations: Plan for mortgage rates in the 4–6% range for the foreseeable future.

• Work With a Broker: Mortgage brokers have access to a wider range of lenders and flexible solutions—especially valuable now.

• Look at Shorter Terms or Variable Options: If you believe rates will come down slowly, you may not want to lock into a long-term fixed rate.

• Get Pre-Approved Now: Locking in today’s rate can protect you from potential hikes, especially as fall approaches.

What If You Bought at Low Rates in 2020?

If you’re facing renewal in 2025 or 2026, your payment could increase significantly. That’s where a strategy comes in. Consider these steps:

• Reassess your budget today, don’t wait until renewal.

• Consider refinancing to a longer amortization for lower payments.

• Talk to a broker about switching lenders if your current offer isn’t competitive.

Bottom Line

Ultra-low rates served a purpose during the pandemic, but they weren’t built to last. Today’s rate environment is more in line with historical norms, and likely here to stay. The good news? There are still smart ways to borrow, invest, and grow your real estate portfolio.

Need help navigating your mortgage in a higher-rate market?
Let’s talk strategy. Whether you’re renewing, refinancing, or buying for the first time, I’m here to help you find the right solution.

Leanne Funston
Mortgage Broker

📞 Call me at 250-320-5514
📧 Email: [email protected]