Mortgage rates may still feel high compared to the ultra-low rates of 2021, but borrowing costs have improved significantly from their recent peak.
After the Bank of Canada aggressively raised interest rates to fight inflation, many Ontario buyers hit pause on their home search. Today, with the Bank of Canada’s policy rate sitting at 2.25%, monthly mortgage payments have become more manageable, even if affordability remains a challenge.
Here’s how much the cost of buying a home has changed.
Buying A $700,000 Home Today vs Two Years Ago
To illustrate the difference, let’s compare the estimated monthly mortgage payment on a $700,000 home using the following assumptions:
- 20% down payment
- Mortgage amount: $560,000
- 25-year amortization
- Illustrative interest rates based on market conditions at each point in time
| Scenario | Approx. Mortgage Rate | Estimated Monthly Payment |
|---|---|---|
| Near interest rate peak (late 2024) | 5.5% | ~$3,420/month |
| Mid-2026 | 4.0% | ~$2,950/month |
Estimated monthly savings: approximately $470 per month
That’s roughly:
- $5,600 per year
- More than $28,000 over five years
Actual mortgage rates vary by lender, borrower qualifications, mortgage type, and term, but the example demonstrates how even a modest decline in interest rates can significantly reduce monthly payments.
Lower Rates Don’t Mean Homes Are Cheap Again
Although borrowing costs have improved, affordability remains a major challenge across much of Ontario.
Home prices in many markets remain well above pre-pandemic levels, and buyers continue to face:
- Higher property taxes
- Rising insurance costs
- Increased utility bills
- Higher maintenance expenses
- Closing costs
For many households, the biggest obstacle is still saving for a down payment.
Ontario Buyers Have More Negotiating Power
The good news for buyers is that today’s housing market looks very different than it did during Ontario’s pandemic housing boom.
Many regions are experiencing:
- Higher inventory levels
- More homes staying on the market longer
- Increased price negotiations
- More properties selling below asking price
That means buyers may be able to negotiate a lower purchase price in addition to benefiting from lower borrowing costs.
What About Variable-Rate Mortgages?
Variable mortgage holders have already seen some relief as the Bank of Canada lowered interest rates from their peak.
If the Bank keeps rates unchanged, monthly payments on many variable-rate mortgages are expected to remain relatively stable.
However, future changes will depend on inflation, economic growth, and future Bank of Canada decisions.
Is Now A Better Time To Buy?
Every buyer’s financial situation is different, but today’s market offers several advantages that weren’t available just two years ago.
Compared to the peak of the market, buyers now benefit from:
- Lower mortgage rates than recent highs
- More homes to choose from
- Less competition
- Greater negotiating power
- More time to make purchasing decisions
While affordability challenges haven’t disappeared, many buyers are finding today’s market far less competitive than it was during the height of Ontario’s housing boom.
The Bottom Line
Mortgage payments have fallen meaningfully from the peak borrowing costs seen over the past two years.
On a typical $700,000 home, buyers could be paying hundreds of dollars less each month than they would have when mortgage rates were at their highest.
Combined with increased inventory and improved negotiating power, today’s market may offer opportunities that simply didn’t exist during the peak of Ontario’s housing frenzy.
References
- Bank of Canada, Policy Interest Rate: https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/
- Canada Mortgage and Housing Corporation (CMHC): https://www.cmhc-schl.gc.ca/
- Financial Consumer Agency of Canada, Mortgage Calculator: https://itools-ioutils.fcac-acfc.gc.ca/MC-CH/MCCalc-CHCalc-eng.aspx
Canada Housing Market 
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