Mortgage rates history: Where do we stand today?

Mortgage and interest rates have been in the news a lot over the last few years. Between the lows of the pandemic and the steep increase since 2022, many Canadians are keeping a watchful eye on the current trends. While today’s rates are feeling pretty intense, let’s take a look at mortgage rates throughout history to see where we stand in comparison.

Overnight rate vs prime rate

To start off, what’s the difference between the overnight rate and the prime rate? These are two terms we use a lot when discussing the Bank of Canada and interest rate trends in the country. The overnight lending rate is set by the Bank of Canada itself. This is the figure the central bank announces any changes to during its eight meetings each year. The overnight rate then helps determine the prime rate. Banks and other institutions adjust their prime rates based on the overnight rate. The prime rate is what affects variable-rate mortgage products in Canada. When it moves up or down, so will your mortgage rate. The prime rate is also always higher than the overnight rate.

Today’s rates

At the time of writing, the current overnight rate is five per cent, and the retail prime rate is 7.20 per cent. 2022 and 2023 have brought us several interest rate hikes in an effort to curb inflation and limit the impact of a potential recession. In the past year alone, the overnight rate has doubled, which has caused a lot of worry amongst home owners. Mortgages are becoming more expensive, and many Canadians have been feeling financial pressure. Right now, mortgage rates are well into the five to six per cent range.

In years past… 

Many people can’t help but compare today’s rates to those we experienced in early 2020. When the pandemic shut down the economy, the overnight rate dropped to 0.25 per cent to keep things moving. This basically felt like free money, and the housing market exploded. Record-low mortgage rates prompted home buyers to scoop up properties at high speeds and even higher prices. When we think about those days, then look at our current situation, it’s easy to feel discouraged.

However, when we look further back in time, we can see that today’s mortgage and interest rates aren’t that bad. Since the 1970s, average mortgage rates have had some major fluctuations. In 1980, the average variable-rate mortgage was 13.45 per cent, and the average fixed rate sat at 14.50 per cent. Fast forward to 1990, and rates were still sitting in the 13 per cent range. By 2000, rates had dropped a bit, but were still well into the seven and eight per cent areas. Where we are today in comparison to historical averages shows that we’re not in a terrible position overall. This intense rate hike cycle, coupled with fears of a recession, have simply made this feel like an overwhelming period.

What can you do?

So, what are your options today? If you’re a home owner, the possibility of more rate increases can be scary. However, the central bank has had success in slowing down inflation, and the odds of further rate hikes are decreasing accordingly. If you have any concerns with managing your mortgage, you can reach out to a broker to discuss your options! Whether you want to chat about refinancing, debt consolidation, or any other mortgage service, we can help you get started. Using a mortgage broker ensures you can manage today’s market with confidence.

If you have any questions about your mortgage, give us a call at Centum Home Lenders! You can reach us at 506-854-6847, or get in touch with us here.