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Rates for the most popular type of mortgage in Canada have sunken to the lowest level in about two years, and they could be heading further south before the end of 2019.

Five-year fixed-rates are now almost at the same level as variable rates. Typically, variable rates are half-a-percent lower, since – unlike a locked-in fixed rate, they can fluctuate.

Today, they’re almost the same.

What is a Variable Rate Mortgage?

The overnight rate influences the mortgage market, in particular variable rates, which closely follow it. A variable rate mortgage will fluctuate with the Prime rate throughout the mortgage term. While your regular payment will remain constant, your interest rate may change based on market conditions. This impacts the amount of principal and interest you pay off each month.

The Bank of Canada will typically cut rates when the economy needs a boost, as lower rates fuel borrowing and spending activity.

While not many market observers are calling for a cut to the overnight rate this year, the general consensus is the central bank will stand on the sidelines and not increase it like they have been for the last two years – at least, for now.

Late last month at a scheduled announcement, the Bank of Canada maintained the overnight rate at 1.75 percent, and in response, the Conference Board of Canada predicted that’s where it will remain for 2019.

“Even with the Bank noting that the recent slowdown in economic growth appears temporary, as they had expected, we maintain our view that the Bank will remain on hold into next year,” Alicia Macdonald, the board’s principal economist, says in a statement.

Today, Desjardins Senior Economist Benoit P. Durocher, predicted the rate environment will remain consistent for the next several months, although he noted global uncertainties, particularly in terms of trade conflicts, could spark a move from the central bank at some point.

“The status quo on key interest rates will continue for several more months,” he writes in response to new Statistics Canada data showing the national unemployment rate just fell to its lowest reading since 1976.

“However, the monetary authorities cannot ignore the many uncertainties facing the world economy, particularly due to trade tensions,” Durocher says.

So, this could mean more rate decreases are coming our way for mortgage rates.

Have questions? We’ve got the answers!

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