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2021 mortgage and housing predictions

2020 was a year to remember for all the wrong reasons. The covid-19 pandemic affected the lives of everyone, while unprecedented civil rights protests in North America and across the globe have fundamentally changed the way we look at the world.

Of course, the more pedestrian parts of our world have changed as well, including the Canadian mortgage and financial industry. With 2021 around the corner, we wanted to share some predictions for trends in Canada’s mortgage and housing market from one of Ratehub’s co-founders and the president of CanWise Financial, James Laird.

Of course, 2020 has taught us that things don’t always pan out the way we expect, so keep that in mind.

1. The Bank of Canada will leave rates unchanged for all of 2021

The Bank of Canada interest rate was slashed to 0.25% early in 2020, and have kept it there since. The Bank has referred to this as the “effective lower bound” of the overnight rate, and that it will likely not increase it until inflation hits its 2% target.

As the vaccine rolls out, it will take time to translate into a full economic recovery. We predict there will be no Bank of Canada interest rate hike until pre-pandemic economic indicators are achieved. Therefore, the prime lending rate for variable-rate mortgages and HELOCs will remain unchanged.

2. Real estate prices (other than condos) will appreciate by 4 – 7%

With Canadians working from home, the demand will continue to be strong for more space, with the strongest growth in the suburbs around major urban centres. We expect larger homes outside of the city centre will see the strongest demand.

3. Downtown condo prices will fall in early 2021, then stabilizing in the second half

University students learning remotely, the lack of immigration, and the crack-down on Airbnb will continue to weigh on condo prices. When students return to campus and borders reopen for new Canadians, demand will return to the condo market.

With home values surging, condominiums will also be the only option for priced out first-time homebuyers.

4. Fixed rates will be modestly higher at the end of 2021

As the vaccine rolls out across the country and there is optimism that the worst of the pandemic is behind us, Canadians can expect bond yields to rise which will cause mortgage providers to modestly increase fixed rates. 

5. There will be no new mortgage regulation introduced in 2021

The government and regulators are focused on the pandemic recovery, therefore they will not introduce any new rules which would make it any harder for homebuyers to qualify for a mortgage.

The bottom line

With 2020 bringing so much unpredictability, 2021 is likely to be more stable by comparison. The pandemic is far from over, so there may still be surprises in store, but a slow return to some sense of normality is likely. Of course, the impact of these predictions will change depending on your circumstances, so it’s best to get some personalized, expert advice. Speaking with a mortgage broker or financial advisor is a good place to start.