Canadians looking to buy a home or renew their mortgages have been facing a challenging year with rising interest rates. But with inflation showing signs of cooling, there’s a light at the end of the tunnel. Here’s a breakdown of what experts predict for mortgage rates in the remainder of 2024:

The Recent Rate Hike and Inflation’s Impact

The Bank of Canada (BoC) has been raising its policy rate to combat inflation. As of May 4, 2024, the rate sits at 5.00%, with the prime rate at 7.20%. This has pushed mortgage rates higher, with current averages around 4.80% for 5-year fixed and 6.04% for 5-year variable (While these are average rates, please note that rates can differ greatly between insured vs. uninsured purchase, refinances and mortgage renewals).

However, recent data suggests inflation is finally decelerating towards the BoC’s target. This has led many to believe the bank may be nearing the end of its rate hike cycle.

A Potential Shift: Interest Rate Predictions

Many financial institutions, including the Big 6 banks, are forecasting a decrease in interest rates starting mid-2024. The predictions range from a decrease of 25 basis points (0.25%) to a total drop of around 100 basis points (1.00%) by year-end.

The next Bank of Canada rate announcement is on June 5th, 2024, and could be a turning point. Market expectations lean towards a potential decrease of 25 basis points. However, the BoC might hold if inflation doesn’t show a sustained decline, aiming to avoid hindering progress made against inflation while also preventing a housing market slump.

What This Means for You

If you’re considering buying a home, or if you have an upcoming renewal, these predictions offer a glimmer of hope for more affordable mortgages later in the year. However, there’s still uncertainty, and rates could remain elevated in the short term. Here are some tips:

• Stay informed: Keep an eye on economic data and the Bank of Canada’s announcements to stay updated on the interest rate landscape.
• Consider a short-term fixed or a variable rate: Evaluate your risk tolerance and financial goals when choosing between a fixed or variable rate mortgage.
• Shop around: Compare rates from different lenders to secure the best possible deal. The easiest way to do this is to work with a mortgage broker.

Disclaimers:

• Remember, these are just predictions, and the actual path of interest rates can be unpredictable. Consulting with a mortgage professional for personalized advice is important. After all, your scenario is unique.
• It’s wise to consult with a mortgage professional for personalized advice tailored to your specific situation.

 

Contact us today.