Labour Day is behind us, the school forms are signed, and the kitchen calendar has filled up again after two months of being mostly blank. September is the real new year in most Ontario households. It's when the summer spending gets added up, the routines restart, and the things that were put off until "after the holidays" come back onto the list.
For a lot of people, the mortgage is on that list. Not because anything is wrong, but because there's a renewal somewhere in the next year or two and a vague sense that the numbers have moved since the last time anyone looked.
So here is where they stood on the first of the month. Nothing dramatic. A small move, in one direction, explained.
Where rates are
| 1 September | A month earlier | A year earlier | |
|---|---|---|---|
| 5-year fixed, our estimate | 4.01% | 3.93% | 3.54% |
| 3-year fixed, our estimate | 3.85% | 3.78% | 3.38% |
| Variable, our estimate | 3.50% | 3.50% | 4.00% |
| Government of Canada 5-year bond yield | 3.35% | 3.27% | 2.88% |
| Prime rate | 4.45% | 4.45% | 4.95% |
Two different things happened, which is normal, and it's worth a sentence on why. Variable rates follow the Bank of Canada: its policy rate sets prime, and a variable mortgage is prime less a discount. The Bank did not move in August, so prime stayed at 4.45% and our variable estimate stayed where it was. Compared with a year ago it is half a point lower.
Fixed rates don't follow the Bank. They follow Government of Canada bond yields, because that is what lenders fund fixed mortgages with. The five-year yield edged up over August, from 3.27% to 3.35%, and our five-year fixed estimate moved with it, from 3.93% to 4.01%. Over the past year the same yield has climbed from 2.88%, which is why fixed rates are higher than they were last September even though the Bank's own rate is lower. Most headlines miss that the two can move in opposite directions.
What that means in dollars
August's move in the five-year estimate works out to about $4 a month for every $100,000 borrowed over 25 years. On a $400,000 mortgage that is roughly $16 a month; on $500,000, about $20. Noticeable on a spreadsheet, not at the grocery store.
The change over the full year is larger: about $25 a month per $100,000, so around $100 a month on $400,000 and $125 on $500,000. That is the comparison that matters if your renewal is the first time you've looked since last autumn.
What else happened
Statistics Canada reported on 17 August that consumer prices rose 3.0 per cent in July from a year earlier, up from 2.8 per cent in June. Gasoline did most of the work, and the Bank of Canada's preferred core measures stayed close to 2 per cent. Anyone who filled a tank for a long-weekend drive already knew the first part.
The Canadian Real Estate Association said on 18 August that national home sales rose 0.5 per cent in July from June, a fourth small monthly gain in a row, while new listings slipped and the average sale price, about $675,000, was essentially unchanged from a year before. CREA described the market as balanced, which is an unusually calm word for Canadian housing.
On the calendar: the Bank of Canada's next scheduled rate announcement is 2 September, with the one after that on 28 October.
If a renewal or a break is on your mind
If a renewal is coming, the renewal calculator shows what your payment becomes at a new rate, and what a lump sum or a different payment schedule changes. If you're wondering about leaving a mortgage before the term is up, the break calculator estimates the penalty and compares breaking with staying; quite often the answer is that staying costs less, and that is a perfectly good thing to find out. How we arrive at the estimates above is laid out in where our rates come from.
None of this needs doing this week. September has enough on it already. But it's a good month for knowing your numbers, even if all you do with them is put them back in the drawer.
Figures are estimates from Bank of Canada data as of the date shown and are not offers or quotes. This is general information, not advice.