Mortgage Rates Montreal | Best Rates from 4.19% - nesto.ca (2024)

As of Friday, September 13, 2024, current interest rates in Montreal are for a 5-year fixed mortgage and for a 3-year fixed mortgage. Shop around for mortgage rates to find the best offer.

Despite home prices in Montreal remaining lower than the national average, high interest rates continue to make it challenging for Quebecers to qualify for a mortgage. Even higher qualifying rates make it harder for Montreal residents to afford their mortgage. While it’s almost impossible to predict when rates will come down meaningfully, experts forecast that we should expect a gradual reduction over the next few years.

Home prices remain high, with CREA reporting that the national average home price decreased 3.9% year-over-year to $724,800 in July 2024. Quebec’s average price increased 4.0% year-over-year to $485,100. As for Quebec’s largest city, the average selling price of a home in Montreal increased 3.2% year-over-year to $533,100.

Montreal Mortgage Rate Trends: September 2024

While it’s difficult to predict where mortgage rates will trend, the consensus among experts suggests that we could see rates remain higher for longer. Forecasts suggest we won’t see interest rates return to the neutral rate range of 2 to 3% until the end of 2025.

Bank of Canada Rate Announcement

The latest Bank of Canada (BoC) announcement on September 4th was a policy interest rate decrease to . The decision to decrease rates came as the BoC cited economic activity was soft in June and July; meanwhile, the labour market continued to slow. Continued easing in broad inflationary pressures and excess supply in the economy are putting downward pressure on inflation, leading the Governing Council to lower the policy rate by 25 basis points.

While inflation has eased, the growth in shelter costs, particularly rent and mortgage interest costs, is currently the most significant contributor to total inflation. The Governing Council continues to monitor core inflation numbers when assessing policy rate decisions to ensure there is sustained downward momentum in inflation.

The next announcement will be on October 23rd. Using nesto’s proprietary overnight index swap and forward rate calculation data, bond markets are currently pricing in the probability of further rate cuts. However, without further sustained reductions to core inflation, the Bank may leave the key rate unchanged.

Real Estate Market Update

On August 15th, the Canadian Real Estate Association (CREA) released its July home sales data. The data showed that home sales fell 0.7% between June and July, offsetting some of the gains made in June.

July’s home sales activity reported that new listings increased by 0.9% month-over-month, which was led by an increase in new supply in Calgary. Slower sales and more new listings continue to increase the number of homes available for sale across most of the Canadian housing market.

Slower sales may likely be the last, as the Bank of Canada’s rate cuts may increase real estate activity. Rate cuts are anticipated to bring some pent-up demand back into the market, with buyers having more housing options than at any point in almost 5 years. Prices have stagnated across most markets except for Calgary, Edmonton, and Saskatoon, where prices have steadily climbed since last year.

CPI Inflation Update

Statistics Canada’s latest inflation data, released onAugust 20th,showed the Consumer Price Index (CPI) rose 2.5% year-over-year in July, down from 2.7% in June. This month’s slowdown is attributed to slower year-over-year growth in travel tours, passenger vehicles and electricity.

Shelter prices continued to be a more significant driver of inflation in July, up 5.7%, down from the 6.2% recorded for June. Higher interest rates are impacting Canadians’ spending patterns, as they are now spending less on discretionary items and delaying big-ticket purchases. This may be contributing to lower demand as prices for durable goods fell 1.7% in July.

Mortgage Statistics for Quebec

Home prices in Quebec have doubled compared to what they were 10 years ago. Here are some mortgage statistics for the housing market in the province:

• Average home value (as of July 2024): $485,100 (QPAREB)
• Canadian homeownership rate (as of 2021): 66.5% (StatsCan)
• Number of home sales (as of July 2024): 7,180 (QPAREB)
• Number of new listings (as of July 2024): 10,096 (QPAREB)

Mortgage Options in Montreal

Montreal conventional mortgage: Conventional or uninsured mortgages require a downpayment of 20% or more. With uninsured mortgages, there is no limit on the purchase price, and you can amortize up to 30 years with prime lending. You will not be required to purchase mortgage default insurance as your downpayment is enough equity to protect the lender if you default.

Montreal high-ratio mortgage: High-ratio or insured mortgages allow you to purchase a home with a downpayment of less than 20% and require mortgage default insurance to reduce the risk to the lender. With high-ratio mortgages, you will be limited to a purchase price of less than $1 million and an amortization of up to 25 years.

Montreal fixed-rate mortgage: Fixed-rate mortgages lock in your interest rate for the term. The principal and interest amounts are fixed, providing predictable and stable mortgage payments. Penalties are calculated based on the higher of the interest rate differential (IRD) or 3 months interest if you need to break the mortgage before the end of your term.

Montreal variable-rate mortgage: Variable-rate mortgages have interest rates that change based on the Bank of Canada policy rate, directly impacting your lenders’ prime rate. Adjustable-rate mortgages (ARM) are variable mortgages that immediately adjust your mortgage payment to reflect the changes made to your lenders’ prime rate. The principal portion remains fixed, while the interest can increase or decrease when the prime rate increases or decreases. Variable-rate mortgages (VRM) are variable mortgages that have fixed mortgage payments despite changes to your lenders’ prime rate. The principal and interest on your fixed payment adjust with more going to interest and less to principal if the prime rate increases or more going to principal and less to interest if the prime rate decreases.

What Affects My Mortgage Rate in Montreal

The mortgage rate you are offered is influenced by your credit score, income, capital, downpayment, and loan-to-value (LTV) ratio. Mortgage rates are also priced based on the risks associated with the mortgage, the purpose of the loan, and the property used as collateral. Some of the most important determining factors affecting your mortgage rate include:

• Downpayment – Your downpayment will determine your LTV ratio and whether you will be required to purchase mortgage default insurance. Insured and insurable mortgages have better interest rates as there is less risk of loss to the lender. Insured and insurable rates apply to properties valued at less than $1 million and amortizations up to 25 years.
• Amortization – The amortization period on uninsured mortgages (downpayments of 20% or more) can go up to 30 years on prime lending. Uninsured mortgages typically have higher interest rates than insured and insurable mortgages to account for the added risk to the lender. The amortization on insured and insurable mortgages cannot exceed 25 years.
• Property Usage – Your primary residence, known as owner-occupied, will generally have lower interest rates. Investment properties you intend to rent out will typically have higher interest rates. A primary residence with a second separate legally registered suite is considered an owner-occupied rental and will have access to the same rates as a primary residence.
• Mortgage Type – Open mortgages have higher rates than closed rates due to the added flexibility. Refinances have higher rates than renewals and new mortgages.
• Credit Score – Your credit score will impact the type of lender that approves you for a mortgage. If you have good to excellent credit, you can typically use prime lending and benefit from the best rates. If you have poor credit, you may need to consider alternative lending solutions with higher rates to offset the lender’s risks.

First-Time Home Buyer Programs in Quebec

Quebec has programs and incentives available to assist first-time buyers with some of the costs of purchasing a home. Some programs are available through the province or municipality, while others are available across Canada.

Home Buyers’ Tax Credit – First-time buyers are eligible for up to $1,400 when purchasing a qualifying home in Quebec. To qualify, you must be a resident of Quebec and intend to live in the home as your primary residence.

First-Time Home Buyers’ Tax Credit (HBTC) – This federal government program allows first-time buyers to claim up to $10,000 for a maximum $1,500 tax credit to help offset closing costs.

Quebec City Family Access Program (Programme Accès Famille) – This program offers financial assistance through an interest-free loan of up to 5.5% of the property value. If the home is Novo-climate approved, an additional direct rebate of 3.5% (of the purchase price) will apply. The qualifying criteria will vary based on your family situation; however, your maximum gross income must be $150,000 or less, and the maximum purchase price cannot exceed $370,000.

Home Purchase Assistance Program – First-time buyers purchasing in Montreal are eligible for up to $15,000 under this program. To qualify, you must not have owned a home in Quebec for the last 5 years and occupy the home as your primary residence.

Land Transfer Tax in Quebec

Quebec’s land transfer tax is called Property Transfer Duties or Welcome Tax. The duties are collected by each municipality rather than the province. Each municipality (except Montreal, which can set a higher amount) can set its own rates, up to a maximum of 3%, on any amount over $500,000. Tiers are adjusted annually based on Quebec’s all-items Consumer Price Index (CPI).

How to Find the Best Mortgage Rate in Montreal

• Step 1: Understand your credit score: Before you start looking for a mortgage lender or applying for a mortgage, check your credit score regularly. This will help you immediately report and remedy errors that could negatively affect your score. If necessary, improve your credit score to help with your mortgage approval.
• Step 2: Determine your borrowing capacity: To find the right mortgage solution, you’ll need to know how much you can afford based on your income and downpayment.
• Step 3: Know your mortgage needs: Analyze different mortgage solutions’ features, risks, and costs. Careful research and comparisons of the available options can help you choose a mortgage that best meets your immediate and long-term financial needs.
• Step 4: Find a suitable mortgage strategy: Your mortgage strategy shouldn’t be based solely on the lowest rate. Get expert guidance to choose the best strategy for your homeownership goals, even if that means not getting the lowest rate.
• Step 5: Compare rates and terms: Not all mortgages are equal. Choosing a lender like nesto for your mortgage can help you compare rates and terms for multiple lending solutions, ensuring you find the best fit.
• Step 6: Get prequalified for a mortgage: Begin your journey towards homeownership by taking advantage of nesto’s prequalification process. By analyzing your downpayment and financial stability, nesto will provide you with a comprehensive prequalification outlining the maximum mortgage amount you qualify for. This information is crucial as it helps you set realistic expectations and narrow your search for a suitable home within your budget.