Estimated reading time: 6 minutes
Table of contents
- Recent Announcement from the Bank of Canada (BoC)
- Key Takeaways
- Mortgage Rate Predictions 2025
- Will Interest Rates Decrease in 2024?
- Bank of Canada Rate Hike in 2024?
- Economist Predictions for 2024 Mortgage Rates
- October 2024 Mortgage Rate Forecast
- Long-Term Mortgage Rates Outlook
- Bank of Canada Rate Predictions for 2024 and Beyond
- Bank of Canada Rate Change Schedule 2024
- What Influences Future Bank of Canada Rate Decisions?
- What Does a Slowing Economy Mean for Mortgage Rates?
- Strategies for Navigating High Interest Rates
- Mortgage Rates for 2024 Buyers and Sellers
- Bank of Canada Rate Forecast 2025-2026
- Final Thoughts
- Read More
Recent Announcement from the Bank of Canada (BoC)
The Bank of Canada has significantly reduced the policy interest rate by 25 basis points, bringing it down to 4.25%. Following a series of previous interest rate hikes, this decision is now starting to have a total economic impact.
It typically takes up to four fiscal quarters (about one year) for rate hikes to have their full effect on the broader economy. As a result, Canadian homeowners are now experiencing the consequences of the ten rate hikes that the BoC implemented over the past months.
With approximately half of Canadian mortgages—around 2.2 million—set to renew within the next two years, homeowners facing renewal will likely encounter a significant increase in mortgage interest costs.
Key Takeaways
- Prime Rate: 4.25%
- Inflation in Canada: 2.0%
- Interest Rate Trend: Decreases are expected to continue in the coming months, potentially easing homeowners’ concerns and stimulating the housing market.
Mortgage Rate Predictions 2025
Interest rate decreases are expected to continue in Canada. The significant banks anticipate a reduction in the policy rate of up to 75 to 100 basis points going into the following year. However, these projections can change depending on macroeconomic factors and global developments.
| Bank | Policy Rate (Dec) |
| BMO | 3.75% |
| CIBC | 3.50% |
| National Bank | 3.50% |
| RBC | 3.75% |
| Scotiabank | 3.75% |
| TD | 3.75% |
Data as of October 8, 2024.
Will Interest Rates Decrease in 2024?
The Bank of Canada raised the policy rate by 75 basis points in 2023. In the future, the Big Six banks predict a 25 basis point decrease to kick off the year, potentially followed by further rate cuts of 75 to 100 basis points by the end of 2024.
Bank of Canada Rate Hike in 2024?
Experts generally believe the BoC will not raise rates in 2024. Most experts expect rate cuts in 2024. The central bank has indicated that its current monetary policy is no longer overly restrictive, as inflation is moving in the right direction. However, unforeseen economic or geopolitical challenges could impact inflation, potentially preventing further rate cuts.
Economist Predictions for 2024 Mortgage Rates
Douglas Porter of BMO forecasts seven consecutive 25-basis point cuts by July 2025, bringing the policy rate to 2.50%. The BoC’s Market Participant Survey suggests the first rate cut may occur in June 2024, with a possible reduction of 25 basis points in October.
| Bank of Canada Announcement Date | Policy Rate (%) |
| October 23, 2024 | 4.25% |
| December 11, 2024 | 4.00% |
October 2024 Mortgage Rate Forecast
Experts predict a potential 25-basis point decrease with the next BoC rate decision on October 23. However, if inflation remains persistent, the BoC may hold the rate steady to prevent derailing its efforts to control inflation. The bank must carefully balance rate adjustments to avoid destabilizing the housing and labour markets.
Long-Term Mortgage Rates Outlook
The full impact of previous rate hikes is starting to be felt, as rate increases can take up to 24 months to work through the economy. Historically, rate-tightening cycles have achieved their objectives in 12 to 18 months, but this period has been challenging for the BoC.
Home sales have decreased significantly, and this trend is expected to continue into 2024 unless home prices are adjusted downward or interest rates begin to decline. While inflation has reduced, it remains above experts’ expectations, especially in housing and demand-driven price increases.
Gradual rate cuts are expected by year-end 2024, with potentially more significant cuts if the Federal Reserve acts more aggressively, putting pressure on the BoC to follow suit.
Bank of Canada Rate Predictions for 2024 and Beyond
Despite inflation remaining above target, the BoC has indicated that further rate hikes are unlikely in 2024. Most experts predict that rates will likely close the year at 4.00%. However, it’s important to remember that these predictions are subject to change based on evolving economic conditions.
Bank of Canada Rate Change Schedule 2024
| Date | BoC Rate Announcement Decision (%) | Target Rate |
| January 24 | No Change | 5.00% |
| March 6 | No Change | 5.00% |
| April 10 | No Change | 5.00% |
| June 5 | -0.25% | 4.75% |
| July 24 | -0.25% | 4.50% |
| September 4 | -0.25% | 4.25% |
| October 23 | TBD | TBD |
| December 11 | TBD | TBD |
What Influences Future Bank of Canada Rate Decisions?
Inflation
Canada’s most recent inflation data indicates a 2.0% year-over-year increase, aligning with the BoC’s target. However, excluding gasoline, the Consumer Price Index (CPI) rose by 2.2%, with shelter being the most significant contributor to inflation at +5.3%.
The BoC adjusts interest rates to keep inflation within its target range. When inflation exceeds 2%, the BoC raises rates to cool the economy and reduce demand. If inflation falls below 2%, the BoC may lower rates to stimulate growth.
Employment
Canada’s August Labour Force Survey showed a modest increase of 0.1% in employment, with a rise in part-time jobs offset by a decrease in full-time positions. The unemployment rate also increased to 6.6%. The BoC aims to balance controlling inflation and maintaining sustainable employment levels.
U.S. Economy
The U.S. economy continues to cool, with inflation falling to 2.5% in August. This has led markets to anticipate a Fed rate cut, which could influence the BoC to make similar adjustments. U.S. bond yields push Canadian bond yields, reducing mortgage borrowing costs.
What Does a Slowing Economy Mean for Mortgage Rates?
The economic slowdown due to COVID-19 increased demand for goods and services, driving inflation. The BoC responded by aggressively raising interest rates. Today, the housing market is feeling the effects of these increases, with decreased home sales and higher mortgage costs.
Unlike previous rate-tightening cycles, the current environment is characterized by much higher debt levels. The effect of rate hikes on mortgage payments is now more magnified, with increases in the BoC’s key policy rate translating into much higher interest payments for borrowers.
Strategies for Navigating High Interest Rates
As interest rates impact the broader economy, borrowers are advised to manage their mortgage payments proactively.
- Fixed-Rate Mortgages: For those seeking stability, locking in a fixed-rate mortgage is a prudent option, especially as rates begin to decrease soon.
- Variable-Rate Mortgages: If you can adjust to potential rate fluctuations, a variable-rate mortgage could provide savings as rates decline over time.
Mortgage Rates for 2024 Buyers and Sellers
Mortgage rates are expected to decrease gradually, but uncertainties around timing and the pace of change may leave some buyers hesitant. If you are considering buying or selling, it may be worth considering short-term strategies or deferring decisions until the market stabilizes.
Bank of Canada Rate Forecast 2025-2026
In 2025, inflation is expected to return to the BoC’s 2% target, potentially allowing the central bank to reduce rates further. Rate cuts could place the BoC’s policy rate within the neutral range of 2.25% to 3.25%.
Final Thoughts
Mortgage rates will inevitably fluctuate, but managing your mortgage payment within your budget is the key to long-term financial stability. Consider consulting with mortgage experts to understand your options better and plan accordingly.
