What They Mean for Canadians in 2024 and Beyond
Interest rates are falling and experts believe they could continue to fall well into 2025, providing welcome news for mortgage holders and potential homebuyers.
The Bank of Canada’s recent decision to drop its trend-setting overnight rate by 50 basis points to 3.75% comes as a relief to variable rate mortgage holders who could be looking at lower monthly payments as a result.
Additionally, those holding mortgages that were locked-in to low pre-COVID rates will also see some relief when they renew, while personal credit line holders will also see a reduction in monthly payments.
Time to buy?
For those looking to enter the housing market, lower rates will allow buyers to potentially afford a larger mortgage. The Bank of Canada noted that residential investment growth is projected to rise as strong demand for housing lifts sales and spending on renovations, much of which is dependant on borrowing rates.
According to the Bank of Canada, the recent rate drop was due largely to falling inflation and the need to stimulate Canada’s growing economy. The Canadian Price Index inflation has declined significantly from 2.7% in June to 1.6% in September. Meanwhile, the Bank of Canada forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026, which is considerably weaker than projected global growth of 3% annually.
What’s Next for Mortgage Rates?
But experts predict rates could fall even further, citing the need to bring down unemployment and boost GDP. CIBC is predicting the Bank of Canada’s policy rate could be as low as 2.25%, a level not seen since 2022.
The Bank of Canada itself signalled that further rate drops could be coming.
“If the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further,” stated the Bank of Canada in an October 2024 press release.
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