2024 Mortgage Interest Rate Forecast and Predictions

It seems that mortgage rates high fever has finally broken – at least for now. 2024 interest rate forecasts could mean that Canada’s soft housing market is poised to turn. After a year marked by caution and spurred by rising borrowing costs. Economists believe the Canadian housing market is showing signs of a rebound and are expecting Canadian interest rates to drop in 2024. 

What Will Happen With Canadian Mortgage Rates in 2024?

2024 is shaping up to be a good year for mortgage holders. Canadian interest rates are expected to decrease over 2024.  Long term interest rates have already dropped by about 1% relative to September’s expectations. A range of predictions from the big 5 banks so far indicate that Canadian interest rates should start to decrease mid 2024. 

What Affects Key Interest Rate Decisions?

• CPI Inflation

CPI stands for consumer price index and it is the measure of average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is used mainly to measure inflation.  The CPI includes 8 main categories of goods and services: Health, Recreation, Food, Shelter, Household operations, Clothing, Transportation and Alcoholic beverages. CPI data is reported for various geographic areas’ including Canada, provinces, and select cities. 

It’s no secret that the housing market is linked to the ups and downs of the larger economy. Inflation can play a role in this relationship by impacting interest rates, which in turn affect mortgages. 

• GDP

GDP – Gross Domestic Product: is a measure of a country’s national income and output. It is the monetary value of all the final goods and services produced within the geographical boundaries of Canada in a given period. 

The overall economy affects mortgage rates. When both the GDP and employment rise, it is a sign of a growing economy. In terms of home loans, the “supply” is the money or credit available to lend. A high demand for mortgages means banks have less money to lend. The opposite is also true, when demand falls interest rates tend to go down. 

• Unemployment Rates

The employment rate is one of the factors that affect 2024 Canadian mortgage interest rates. Unemployment is a necessary factor in how mortgage rates are determined because central banks use the unemployment rate to determine the amount and cadence of rate hikes. 

The unemployment rate is a significant indicator of the health of the labour market and the overall economy. Low employment can indicate a stronger market, but more wage pressure.  When employment is low banks lower interest rates in hope that job creation will increase. The number of jobless individuals also affects the demand for housing as  prospective home buyers may hesitate in taking on a long term asset. This decrease in demand can cause pricing to drop and influence Canadian 2024 mortgage interest rates.

Will Mortgage Interest Rates Decrease in 2024? Here’s A Few Reasons Why:

The decisions Canadians make on their mortgage in 2024 largely depend on the mortgage rate forecast. While no one has a crystal ball, the team at Prime Mortgage Works looked at a variety of real world indicators to help predict when the bank of Canada might begin reducing rates. Wording of the latest announcements made by the Bank of Canada have led economists to speculate about potential interest rate cuts around the corner.

If you’re wondering about your mortgage eligibility, use our easy online mortgage calculator.

One way to gauge when that may occur is by looking at some of the below factors:

Increasing Amount of Mortgage Renewals Upcoming

According to a recent Royal LePage Survey conducted by Nanos, 74% of Canadians with residential mortgages set to renew this year are concerned about the renewal, since the series of interest hikes since March 2023. 31% percent of all mortgages in Canada say their lending agreements are set to renew within the next 18 months. That means that 3.4 million Canadians have mortgages set to renew by spring of 2025. 

The Inflation Target Remains Low

As more households and businesses feel the impacts of the higher rates we’ve been experiencing over the past few years, Canada is now expected to fall into at least a mild recession. So while the economy is sputtering now it may begin rolling backwards early into this new year. 

While inflation is set to decline, it still currently remains slightly above the target range. Canada’s annual inflation rate in November held steady at 3.1%, above the central bank’s 2% target. The bank expects inflation to cool to 2.5% by the end of 2024 and return to the 2% targeted by the end of 2025.

Real Estate Sales Slowing 

Canada’s housing market is still in a slump, with fewer listings being made and fewer still property sales, according to new monthly data from the Canadian Real Estate Association (CREA). With this pace of home sales dropped to lows not seen in years, forecasters are predicting the sluggishness to continue into early 2024. With higher borrowing costs clearly weighing on would-be buyers, we see home sales remaining below average through early 2024, However, based on the historically low per-capita sales average combined with recent population growth, this demand will eventually become released, guided by falling interest rates in addition to baseline housing demands. 

Mortgage Renewal Coming Up? Contact Our Victoria Mortgage Brokers

 It’s never been more important to find your best rate and options when it comes time to renew your mortgage. Contact Prime Mortgage Works today to learn about securing your mortgage in Victoria. Book a compliementary appointment online today.