What factors influence the mortgage interest rates offered by lenders?

Mortgage interest rates are predominantly influenced by broader economic conditions, particularly the monetary policy set by central banks like the Bank of Canada. The overnight rate is a key tool used by the Bank of Canada to guide economic activity—when this rate is increased or decreased, it affects the cost of borrowing money across the economy, thereby influencing the interest rates that lenders offer on mortgages.

Economic conditions such as inflation rates, employment rates, and overall economic growth can lead to changes in the overnight rate. When the economy is strong, the central bank may raise rates to keep inflation in check, leading lenders to also increase their mortgage rates. Conversely, during economic downturns, the central bank may lower the rate to encourage borrowing and spending, which can lower mortgage rates.

While factors like borrower income, employment history, property location, and borrower age can influence specific lending decisions, they do not have as significant an impact on the interest rates offered by lenders as the macroeconomic conditions do. These personal factors may affect a borrower's ability to qualify for a mortgage or the terms of a mortgage but do not drive the overall interest rate trend in the market.