Welcome to the monthly Better Mortgage Select newsletter, this is our September 2024 edition.

Brought to you by Daniel Patton, Michael Zanzini, Lorenzo Podda, and of course, our President Dave Butler.

Three for three! That’s right - the last three Bank of Canada meetings have all resulted in the same outcome: a 0.25% reduction to the country’s key rate. So far in 2024, we’ve seen a total decrease of 0.75%, with the prime rate falling from its peak of 7.20% down to 6.45%. For those keeping track, these 2024 reductions essentially offset the quarter-percent hikes from June and July 2023, as well as the one in December 2022, bringing us back to the same variable rates we saw in October 2022.

If you hold a variable rate mortgage, your interest rate will adjust later this month, likely landing in the 5.45% - 6.00% range depending on your discount to prime. The Bank of Canada cited a weakening economy and lower expected future inflation as reasons for continuing with rate cuts. At Better Mortgage Select, we’ve consistently viewed these cuts as just the beginning, with more likely to follow into the second half of 2025.

Most major bank economists are revising their 2024 and 2025 rate predictions, with a consensus indicating that the Bank of Canada may deliver additional cuts at its final two meetings this year (October 22nd and December 11th). If that happens, we’ll close out 2024 with rate reductions at each of the last five interest rate meetings of the year. The last time the Bank of Canada cut rates in five or more consecutive meetings was during the '08/'09 U.S. financial crisis, when they implemented eight consecutive cuts from October 2008 to September 2009.

Many of you have likely noticed that fixed mortgage rates have dipped quite a bit over the last six months or so, with many 3-year and 5-year rates now in the 4.39% - 4.89% range. Naturally, you might be wondering, "With fixed rates this low, why would anyone choose a variable rate at, say, 5.75% today?"

Conversely, some of you might be thinking, "If the Bank of Canada is expected to cut rates by another 1.50%-2.00%, I’m comfortable opting for a variable mortgage now, riding the rates down, and then locking into a lower fixed rate later." Regardless of which side you’re on, it’s refreshing to be in a position where the choice between fixed and variable rates is an exciting dilemma to have.

But let’s dive into the data:

So, it’s reasonable to ask, "Why would I choose a variable rate that’s over 1% higher than the fixed rate I can get?"

Let’s explore this:

Today, you might face a choice between a variable rate at 5.75% or a 3-year fixed rate at 4.49%. On the surface, the lower rate seems like the obvious choice. But consider a scenario where the Bank of Canada reduces the prime rate by another 1.50% over the next 12 months.

In this case, the variable rate would drop from 5.75% to 4.25%, giving you a distinct advantage over those locked into fixed rates. The key perk of a variable rate mortgage is the ability to convert to a fixed rate at any time, at no cost (of your current mortgage term or longer). If the Bank of Canada lowers rates as expected, fixed rates could drop by at least another 0.50% - 0.75%. This means a borrower with a variable rate could not only be paying a lower rate in a year compared to those who chose fixed rates today but could also lock in a fixed rate likely in the 3.69% - 3.99% range for up to five years.

This scenario allows the variable rate borrower to secure a lower fixed rate by 2025, extending their mortgage renewal to 2030. Meanwhile, those who choose a 3-year fixed rate today will face renewal in 2027, with uncertainty about where rates will be at that time. Converting from a variable to a fixed rate is entirely free—no credit check, no employment verification, and no cost. When you’re ready to switch, simply contact your lender, ask about the best fixed rates available, and if one appeals to you, lock it in.

To be clear, this doesn’t mean a variable rate is inherently better than a fixed rate. It is clear that fixed rates are currently lower. However, considering the Bank of Canada’s expected rate cuts over the next year, it’s worth exploring all options to determine which one will best suit you and your family.

If you’d like more information or want to discuss your options with one of our mortgage experts, email us at info@bmselect.ca, and we’ll be happy to assist you.

With interest rates finally in a downtrend, this upcoming webinar will truly be topical as we discuss refinancing, debt consolidation, and what to do with an upcoming mortgage renewal.  Our expert panel will be there to educate and guide you, as well as answer any of your questions.  Also, our very own President, Dave Butler, will be joining us and providing his insight.

Earlier this year, we had the pleasure of getting to know the amazing team behind Property Valet, a fantastic company with a reputation for excellence. In August, we officially sealed the deal to become their trusted partner for assisting their clients and investors with mortgage financing and strategic planning.

Property Valet offers premium vacation rental services across Ontario, Quebec, and British Columbia, focusing on delivering exceptional guest experiences in popular destinations such as The Blue Mountains, Mont-Tremblant, and Revelstoke. Specializing in the management of luxury vacation homes and chalets, Property Valet elevates guest stays through exclusive offers and strategic partnerships. Their commitment to maximizing the value of vacation rental properties is evident through their professional management services and investment opportunities, backed by extensive industry expertise and a network of trusted partners.

Also, a reminder that our team will be attending two of the biggest real estate investor conferences of the year, coming up over the next month:  The Rock Star Real Estate 'Your Life, Your Terms' event, and the KeySpire Investor Summit.

Just a friendly reminder to come visit us on our socials, where we put out a ton of videos with tips and information to help you navigate the wild world of mortgages! Check out the links below and give us a follow!

As always, if you have any questions or want to do some mortgage planning, feel free to reach out to us at: