Experts say mortgage owners will be left with mixed emotions after the Bank of Canada decided to hold interest rates and indicate that it's too early to lower rates. 

The central bank elected to hold its key policy rate at five per cent on Wednesday for the fifth consecutive meeting, while Bank of Canada Governor Tiff Macklem said in a speech that it is “still too early to consider lowering the policy interest rate.” Victor Tran, mortgage and real estate expert at Ratesdotca, said in an interview with Wednesday the announcement was of “no surprise to Canadians.”   

Alana Riley, head of insurance mortgages and banking solutions at IG Wealth Management, said in a statement to Wednesday that the Canadian bank prime rate will remain at 7.2 per cent following the policy rate announcement. 

“This announcement has left many Canadians with mixed emotions as some were expecting the rates to drop in the upcoming Spring season. Unfortunately, this decision will continue to put pressure on the cash flow of Canadian households with variable-rate mortgages, HELOCs (home equity line of credit), and unsecured lines of credit,” she said. 

James Laird, the co-CEO of and president of CanWise mortgage lender, said in a statement Wednesday that Canadians should anticipate rates to remain high until the central bank is confident that inflation is under control. 

“Anyone with a variable rate or a home equity line of credit (HELOC) will probably be disappointed that there is no indication of when the first rate cut will occur,” he said. 

“With rate hikes seemingly off the table, anyone who has not already hit their trigger rate should take comfort knowing that they will remain below that threshold.”

According to Tran, fixed-rate mortgage products are currently popular among consumers. He said fewer people are opting for variable rate products and instead prioritize “certainty and stability.” 

Laird said he is also seeing this trend, adding that shorter-term fixed products are likely to remain popular ahead of potential rate cuts in the second half of the year. 

Mortgage delinquencies 

The Bank of Canada’s decision to hold interest rates comes a day after data from Equifax Canada showed that consumers in Ontario and B.C. increasingly missed mortgage payments in the fourth quarter of 2023. 

Data from the agency found that mortgage delinquency rates surpassed pre-pandemic levels. In Ontario, the delinquency rate for mortgages rose 135.2 per cent compared with the previous year, while in B.C. the delinquency rate rose by 62.2 per cent. 

“With data beginning to surface surrounding increases in mortgage delinquencies, the impact of an elevated interest rate environment may be crystallizing,” Daniel Vyner, the principal broker at DV Capital, said in a statement to Wednesday. 

“Although, to many, a hold is better than an increase, it is worthy of consideration not to underestimate the impact of a prolonged hold, especially for those who budgeted or entered the market at lower interest rates.” 

He also noted that as well-capitalized homeowners may have the ability to withstand higher interest rates, others “may not have the stamina to do so.” 

‘Buyers are back’ 

After the Bank of Canada’s interest rate decision, Laird said he was “surprised” the central bank did not comment on concerns regarding the strength of Canada’s real estate market so far this year. 

According to Tran, real estate activity has been “very busy” in Greater Toronto and Southern Ontario. 

“The market really turned in the past month and buyers are back in the market. They all jumped off the sidelines and are ready to participate in bidding wars again. I think simply people are just tired of waiting to get in,” he said. 

Tran also highlighted that based on interest surrounding a potential rate cut later this year, many prospective buyers are “trying to get in before it gets too busy.” 

“You're seeing, 20 bids on certain properties in the city. It's almost back to a seller's market right now, it's really busy,” he said. 

With files from Bloomberg News and The Canadian Press.