As we enter the latter half of 2024, the landscape of Canadian mortgage rates is shifting. The Bank of Canada has already reduced interest rates twice this year—both in June and July—each by a quarter point. These cuts raise an essential question: where will interest rates go from here, especially with over 2.2 million Canadian mortgages up for renewal in 2025 and 2026?
The forecasts for the remainder of 2024 show a clear trend:
This could mean a 1% rate drop from June 2024 to January 2025—a significant shift that will impact many Canadians, especially those with variable-rate mortgages who aren't paying down their principal.
Interest rates aren't just numbers—they affect everyday life. In Canada, for every $1.65 of income, we owe $1 of debt. This makes even small changes in interest rates crucial. A 1% decrease could ease the burden on many Canadians, potentially influencing not only mortgage renewals but also the broader real estate market.
The question of whether rates might rise again in 2024 lingers, but the likelihood seems slim. Most predictions suggest further decreases, with many anticipating the next rate cut in September. A potential reduction in December could follow this, leaving October as a skipped opportunity for adjustment.
The long-term outlook suggests that by mid-2025, the central bank's overnight rate could drop to 2.75%. While this isn't as low as the 0.25% seen during the COVID-19 pandemic, it's a significant decrease that could stabilize or even boost certain real estate markets.
Lower rates might rekindle activity in specific markets, particularly where housing prices remain affordable, like in parts of Alberta. However, the broader impact on house prices will depend on various factors, including supply levels and employment trends.
For those considering a mortgage, the choice between fixed and variable rates remains crucial. If you're confident in a downward trend in rates, a floating variable rate could offer savings as your payments decrease with the market. On the other hand, fixed rates currently present good value, having dropped by at least 1% over the past year.
Interest rates are likely to continue their downward trend, providing some relief for mortgage holders. Whether you're renewing a mortgage or entering the market for the first time, understanding these shifts will help you make informed decisions. As always, your choice should reflect your current financial situation, not just market predictions.
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