It goes without saying that 2020 was an unprecedented year. Covid 19 changed all that we knew to be true. In reaction to the close of businesses, government stimulus and the affect lockdowns had on the economy, mortgage interest rates generally went down. The goal was to prevent an economic collapse.
Housing markets held their ground and actually outperformed the pre-pandemic market in many cities. For example; the city of Barrie experienced low supply in relation to the high demand for homes to purchase. This caused multiple offer situations and big price increases.
Canadian Mortgage Trends published an excellent briefing of the year in review,
Covid 19 and Mortgage Deferrals
Given the extenuating circumstances, most lending institutions provided an option to defer mortgage payments for up to six months to help people who suffered a loss of income that was at no fault of our own. 800,000 mortgages were deferred and the federal government backed financial institutions to insure that they remained intact while receiving less mortgage payments from their customers. Should this not have been allowed, many, many mortgages would have defaulted, many homeowners could have lost their homes and our economy would have taken a drastic downward spiral.
Bank of Canada
In order to keep our financial system fluid, the Bank of Canada dropped their key lending rate from 1.75% in February to just .25% by the end of March. Over the year the Bank also bought tens of billions of dollars in government bonds, keeping investments and financial institutions intact as well.
Historic Lows for interest rates
Interest rates reduced to all time lows impacting homebuyers qualification and affordability for mortgages. Interest rates dipped below 2% for five year fixed and in December HSBC unveiled the lowest mortgage interest rate in history for an insured variable rate mortgage at .99%. I don’t know if they still have it!
Real Estate Market
Real estate sales plunged at the beginning of the lockdown in March but by the Fall home sales were back in business making up for lost time from the Spring.
According to the Canadian Real Estate Association the year ended with record low supplies causing expectations that prices will maintain their upward momentum into 2021, while forecasts do suggest a more moderate pace.
For further info, please see 2020 – A year in review
