How are Mortgage Rates Influencing the Condo Rate in Canada?

Are you looking forward to purchasing a condo in Canada? If yes, then there are a few things you should know! The mortgage rate in Canada has a direct influence on condo rates. Mortgage interest rates completely impact the whole housing market. Understanding this and how prices act will help you get the best deal during the interest rate fluctuation. Read on and gather all the essential information to make the best decision on your pre-construction condo.

The Basics of Understanding The Mortgage Rate

Before buying a condo in Canada, it is highly important to understand the basics of mortgage rates. In simple terms, it is the interest rate. This rate is applied when you take a home loan to get your dream house. The rate gets changed by the impact of the economy, the lender’s expenses, or the individual credit score. Additionally, This rate plays a vital role in deciding your monthly payments.

This mortgage rate can be fixed or can also fluctuate based on a benchmark interest rate or the overnight rate. The Bank of Canada sets this benchmark rate. They ultimately affect the mortgage rate all around the nation. In March 2024, it was decided that the target overnight rate would be 5%, at the meeting of the Bank of Canada. Additionally, when we come to the current conventional mortgage rate, its prime rate 7.20%. (source)

How Mortgage Rates Impact Condo Rates?

Both the mortgage rate and the condo rate in Canada are directly proportional. When mortgage interest rates go down or are low, that’s the best time to get your hands on your condo or pre-constructed home. During this time, the borrowing cost goes down, and homeownership becomes way more affordable.  

If the mortgage interest rates are higher, getting a condo will be comparatively expensive. The market will ultimately slow down, and the pieces of property will be affected significantly.  

The Bank of Canada has a policy of overnight rates, which is the benchmark interest rate. The rate fluctuation that occurs happens concerning the prime rate. This is how the mortgage rate is determined, and the buyers accordingly compare the rates.  

Factors That Contribute To Mortgage Rates Canada

The mortgage rates in Canada are influenced by several factors that can be classified into two groups: internal and external factors. Understanding both helps in going through the mortgage market and making informed decisions in your condo buying. Here are the classifications:

  • Internal Factors

The internal factors that fluctuate or affect the mortgage rates are economic conditions, the down payment amount, the credit score of the buyer, the location of the home, and lastly, the type of loan.

  • External Factors 

The external factors also have a significant impact on the mortgage rate. Inflation, employment rates, GDP, current stock market pricing, home sales, and Federal Reserve reports are included in the external factors.

Which Mortgage Rate To Choose?

Here are the types of mortgage rates to help you choose the best one for your condo purchase:

  • Conventional Mortgage

This mortgage is the standard form that is not backed up by the Federal House Administration. This is the simplest form of loan where the amount is given that needs to be paid within the loan life, which can be 15, 20, or even 30 years.

  • Adjustable-Rate Mortgage

If you are a risk-taker, this mortgage type is for you! The adjustable-rate mortgage is where the interest is lower. It is completely subjective to the market situation, and the interest rates are determined by the Federal Reserve. 

  • Fixed-Rate Mortgage

Wish to have stability? The fixed-rate mortgage is your call! It fixes the mortgage payment to be the same throughout the life of the loan. Irrespective of the market situation, due to the “lock-in” system, you get the same mortgage payment.

  • Government-Insured Mortgage

If your credit score isn’t high and you still want to go for a mortgage, then this is your ideal mortgage type. In a government-insured mortgage, the FHA makes a promise to pay back your part if you default. In exchange for this, they loosen the credit of the individual. One with something around a 3.5 credit score can get the benefit of a mortgage through this specific type. 

  • Jumbo Mortgage

You will need a jumbo mortgage when you wish to purchase an expensive home! That is where the lender calls for a much higher mortgage than the conforming limits set by the FHA. With a bit of documentation, you will be good to go!


Getting a pre-construction condo on a budget is a very subjective thing. It depends on several factors, and the mortgage rates greatly impact the overall pricing. The whole housing market value changes according to mortgage rates. So, be a responsible buyer, know the market conditions, and get the best deal on your condo in Canada.

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