REPORT: Canadian mortgage rates and housing market trends 2020
Experts say we haven’t yet seen the full effects of COVID-19 on the housing market.
On average, Canadians save thousands of dollars per year by comparing rates with us.
Prospective homebuyers in Ottawa, you’re in luck. LowestRates.ca wants to help you find the best mortgage rates in Ottawa with almost no work on your part.
With our free, no-obligation service, LowestRates.ca automatically connects you with 30+ banks and brokers in your area. Just tell us what you want to do — buy, refinance, or renew — and how much you want to borrow. LowestRates.ca will show you the lowest rate you might qualify for and connect you with the right broker in your area.
All you have to do is fill out the form above and you’ll be on your way to securing the best current mortgage rates in Ottawa.
Ottawa is quickly becoming one of Canada’s most popular housing markets.
LowestRates.ca mortgage rates vs. the average bank rate
Ottawa mortgage rates from LowestRates.ca are consistently lower than the bank rate. Since 2019, our five-year fixed rates have been about two whole percentage points lower than the average bank rate. Since January, the average 5-year fixed mortgage rates from Ottawa lenders on LowestRates.ca was 2.65% whereas the average bank rate was more than 5%.
Two percentage points on a $500,000 mortgage makes a difference of more than $200,000 over the life of your loan.
On average, LowestRates.ca mortgages are 2.6 percentage points lower than the bank rate. On a $500,000 mortgage with a 20% down payment, this adds up to savings of:
|Month||Average LR 5-year fixed rate in Ottawa||Average bank rate|
If you’re not convinced yet, sit tight. Comparing mortgage rates on LowestRates.ca is a great way to save thousands of dollars on your mortgage, but that’s not all.
Variable rates are historically lower than fixed rates in Canada. However, over the past year, something unusual has happened: fixed and variable rates have been pretty much tied.
Fixed rates have actually averaged out to be a fraction of a percentage point lower.
Since January 2019, 80% of our Ottawa users have gone with a fixed rate and 20% have gone with a variable rate.
On average, LowestRates.ca variable rates are just 0.02 percentage points higher than our average fixed rate.On a $500,000 mortgage with a 20% down payment, this adds up to savings of:
|Month||Average LR 5-year fixed rate in Ottawa||Average LR 5-year variable rate in Ottawa|
The housing market in Ontario has been booming for years, yet Ottawa remains a reasonably-priced market, popular amongst families and young people. Property values have increased, but at a much more manageable pace than the Toronto real estate market. Prices for single-detached family homes increased from about $445,000 to over $510,000 between January 2019 and February 2020.
By February 2020, the average price of a single-detached home in Ottawa hit $510,000.
Other forms of housing, such as townhomes and apartments also saw modest increases. The average price of a townhouse in Ottawa reached $319,000 this year, and the average price of an apartment reached $338,000.
Take a look at the graphs below to get an idea of how the housing market in Ottawa has changed in the past year.
Single-detached home, apartment and townhouse prices in Ottawa
Source: Canadian Real Estate Association MLS
The price increases in Ottawa last year can largely be attributed to an increase in sales volume between 2019 and 2020. In February, 2020, the Ottawa real estate board reported 1,141 properties sold, an uptick of 13.9% from the same time last year.
A single-detached home on the market in Ottawa takes approximately 41 days to sell, compared to a condo or apartment building which takes an average of 25 days to sell. The number of home and condo sales peaked in Ottawa in 2019 in the month of May, followed by the month of June.
While searching for the cheapest mortgage rates in Ottawa, one of the main decisions homebuyers will need to make is whether to choose a fixed or variable rate mortgage.
While fixed and variable rates have been closer than ever on LowestRates.ca over the past year, there are some key differences to be aware of
A fixed rate stays the same for the duration of your mortgage. A variable rate, on the other hand, means that your rate won’t stay the same. Your lender will adjust it based on market conditions. In 2019, 80% of homebuyers in Ottawa opted for a fixed rate while the other 20% selected a variable rate.
In the long-term, variable rates historically yield the most savings, which is why we recommend them over fixed rates.
Mortgage term: Homeowners are committed to their lender and mortgage contract for the duration of their mortgage term (which is spelled out in the contract). At the end of their term, they can renew their contract at a new rate. The most popular mortgage term in Canada is five years, though terms can range from six months to 10 years.
Amortization period: The amortization period refers to the duration of your mortgage. In other words, the total amount of time it will take you to pay off your loan’s principal plus the interest. In Canada, the maximum amortization period is 35 years. If your down payment is less than 20% of the total price of the home, you’ll need to purchase mortgage insurance from the Canadian Mortgage and Housing Corporation (CMHC) and your maximum amortization period is 25 years.
Depending on whether you’re a homeowner, renter, driver or commuter, your cost of living in Ottawa will vary. There are some things to look out for, however, if you’re considering a move.
In addition to your mortgage, there are a number of other costs to consider when thinking about relocating to Ottawa. One of the biggest costs may be auto insurance, if you own a vehicle. While Ottawa residents pay some of the lowest car insurance premiums in Ontario, the provincial average is still high (Ontario has the second highest car insurance rates in Canada)., Ottawa has a lot of attractions, which could also mean additional strain on your wallet.
In addition to your mortgage rates, Ottawa homebuyers will also need to consider these extra costs that come with purchasing a home in the city:
Down payment: When you buy a home, you’ll need to pay a percentage of the purchase price up front. In Canada, your down payment must be between 5% to 20% of your home’s total sales price, depending on the price of your home. Here are the rules according to the federal government:
A home that costs $500,000 or less - 5% of the purchase price
A home that costs $500,000 to $999,999 - 5% of the first $500,000 of the purchase price, and 10% for the portion above the purchase price above $500,000
A home that costs $1 million or more - 20% of the purchase price
Land transfer tax: The City of Ottawa charges homebuyers a provincial land transfer tax. The province of Ontario calculates land transfer in the following way:
+ 0.05% of the first $550,000
+ 1% of the amount exceeding $55,000 up to and including $250,000
+ 1.5% on the amount exceeding $250,000 up to and including $400,000
+ 2% on the amount exceeding $400,000 up to and including $2 million
+ 2.5% on the amount exceeding $2 million.
So, for example, on a home worth $500,000, you’d pay $6,475 in land transfer taxes.
Tax credits: When purchasing a home, there are a number of tax credits you may be eligible for. Some of these might include:
The Federal Home Accessibility Tax (HATC) for Seniors and Persons with Disabilities: This non-refundable tax credit allows you to claim up to $10,000 in renovation expenses. This credit is applicable country wide and is available for homeowners who are aged 65+ before the end of the tax year or who have a disability.
First Time Homebuyers Tax Credit: This is a $5,000 non-refundable tax credit designed to help buyers manage the closing costs of purchasing a new home. This credit is applicable across Canada.
Home insurance: Home insurance isn’t a legal requirement in Canada, but most lenders require you to obtain a home insurance policy before they give you a mortgage. Home insurance protects your home from a number of unexpected incidents that could cause damage to your property.
The federal government offers first-time homebuyers the option to access financing of up to 5% of the purchase price of a home. Financing can be increased to 10% if it’s a new build. This is called the First Time Homebuyers Incentive. Homeowners that choose to access this benefit are essentially entering into a mortgage with the government of Canada. You also need to pay the government back when you sell your home or after 25 years — whichever comes first.
Your down payment: There’s no getting around it. The size of your down payment is the primary contributor to the size of your mortgage loan. It also factors significantly into determining your mortgage rate. The more you’re able to put down right away, the more your lender will trust in your ability to make your mortgage payments on time. When it comes to your down payment, the larger the amount, the better.
Your debt service ratios: In addition to your down payment, Ottawa lenders look at a number of other factors when calculating your mortgage rates. These are known as debt ratios and can be grouped into two categories:
Gross Debt Service Ratio (GDS): To calculate your GDS, lenders determine how much of your paycheck will go towards housing. This includes your mortgage, property taxes, heating costs and 50% of your condo fees (if applicable). The lender then divides this by your gross annual income. If the result is less than 35%, your lender will feel confident in your ability to cover all your housing costs.
Total Debt Service Ratio: Your TDS ratio is everything that comprises your GDS ratio plus any other monthly payments you have to make. These could include things like credit card debt, loan payments and car payments. The total is divided by your income. If the result is greater than 42%, your lender may doubt your ability to make your monthly payments.
Getting the best mortgage rates is one great way to save money on your mortgage, but it’s one of many things you can do to increase the overall affordability of your mortgage. Some of these features might include prepayment privileges and portability.
Prepayment privileges: Some banks and brokers will offer different prepayment terms, so it’s important to raise the issue before you sign your contract. A prepayment privilege allows you to pay off your mortgage early without having to pay an additional fee.
Penalties: If you need to break your mortgage, which you may need to do when you refinance or move, you may be required to pay thousands of dollars in penalties. While you may wind up with a better rate, if you choose to go with a different lender, it’s important to look at the fine print to ensure that it won’t cost you more than you’ll gain.
Portability: One way to avoid these penalties is to negotiate a portable mortgage. This means that if you move, you can transfer your mortgage to a new home and combine it with an additional mortgage loan.
LowestRates.ca works with more than 30 banks and brokers across the country to bring you the best rates from lenders in Canada?. We work with our partners to obtain their best deals and offers, and then we let them compete for your business.
Experts say we haven’t yet seen the full effects of COVID-19 on the housing market.
If you’re planning to sell your house or break your mortgage before the end of your term, there could be fees to pay.