The Big Short

Historical Mortgage Rates Throughout Canada

At one time the Canadian mortgage market seemed like little more than some friendly competition between banks and credit unions. Boy, have times changed. From the heart-stopping mortgage rates of the 80s to our current dip just below 2.5%, today the market looks more like a stadium of gladiators at battle. To get a better idea of what the future holds for Canadian mortgages, I took a long look at Canada’s historical rates* over the last seventy years—here is some of what I discovered. The data provided is based on posted rates as a discount given to an individual borrower can vary greatly. Many lenders will also have promotional rates depending on how quickly the mortgage funds, if the mortgage is insured, and the “loan to value” ratio or simply the percentage of the value of the home that is being borrowed.

THE 80s

More than lacey Madonna, jelly bracelets and perms, the 80s were a time where real estate was low and mortgage rates reached an all-time high. From late 1980 to the fall of 1982, five-year fixed-rate mortgages went from 15% to just over 21%; a staggering number when you consider mortgage rates today.

Just last year The Financial Post published a piece that highlighted a Toronto-based credit union who was offering a 1.49% mortgage on an 18-month fixed term—one of the lowest rates (if not the lowest) offered in Canadian history and one that all expected to drive the engine of the country’s most sought after real estate to an all time high. Not so long afterwards TD Bank followed up with a five-year fixed rate of 2.74%, which at that time was the lowest ever advertised by a Big Bank for a five-year term.


As an article published in The Globe last year points out, the 80s wasn’t the only decade that gave homeowners a tough time. For a whopping 18 years straight (from 1973 to 1991), five-year fixed mortgage rates maintained a rate above 10%. This same piece noted some other interesting numbers too; in particular, the average 5-year fixed mortgage rate on a home in 1982 was a shock wave at 19.4%, compared to just 3.8% in 2015.


The amount owed for outstanding residential mortgages in Canada has multiplied by more than 30 times what it was in the early 80s. What was a $30-billion debt in outstanding mortgages in 1982 has climbed to the suffocating amount of $953-billion as of 2015.


Another quick look down memory lane shows us the relatively stable rates of the mid-90s, with a prime rate mortgage in the fall of 1996 at 5%. At the same time the following year it was 5.25%, and then 7.25% in 1998. Compare that to the average residential mortgage-lending rate on a five-year term 40 years earlier, in October 1958 when it was at 6.8%, or in 1968 when it sat at 9.01%, and then October 1978 when it sailed to 10.93%.


Though many believe that the current low mortgage rates being offered are the catalyst for the high prices of homes in Canada’s hottest markets (Vancouver and Toronto), there have been some parameters put in place to help quell fears. Last year the CMHC, as well as Genworth Canada, raised premiums on mortgage default insurance for those with less than a 10% down payment, which is the group most likely to default.

As for a correction in the real estate market, low interest rates might be feeding into the problem but they’re not likely to change any time soon. The Bank of Canada is now far more experienced in dealing with inflation and most economists believe that even a small increase would be enough to taper a runaway market. Though Canadians are now far more debt laden than they once were, low interest rates are helping to keep things under control; at least for the time being.

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