What To Expect From Mortgage Rates in Canada 2024: A Forecast
It’s been an exciting year for the Canadian property market, with the federal interest rate finally decreasing and multiple incentives for first-time buyers. As we approach the end of 2024, many people are wondering if there might be other changes, and particularly what the interest rate announcement this following week may be.
So, let’s review everything we know and explore what the end of the year might bring for property investors, first-time buyers, and current homeowners considering moving.
Key Factors Affecting Mortgage Rates in 2024
According to the RBC, Canada’s housing market could take a decade to stabilize fully, mostly due to economic issues caused by the global pandemic. Other countries face similar problems, but we’ve witnessed gradual improvements in 2024.
To understand what we might be able to expect from mortgage rates, it’s essential to look at key factors that impact them.
Bank of Canada Interest Rate Policies
Mortgage rates rely on the Bank of Canada’s interest rates, which impact property prices and affordability. If the BoC raises its interest rates, mortgage prices will increase, while lower base rates boost mortgage affordability.
Interest rates increased in response to inflation, but they gradually decreased in 2024, symbolizing positive changes for the Canadian economy. Experts believe interest rates will continue to fall, but it will be gradual.
Global Economic Conditions
The global stage indirectly impacts Canadian mortgage rates, with key risks including financial market fluctuations, recessions, and inflation. Political crises and international conflicts can also influence mortgage costs.
An economic downturn could create a ripple effect on Canada’s property market if it is severe enough.
Housing Demand and Market Activity
Mortgage rates mostly move in line with housing demand. Canada’s housing market continues to be strong in its most popular cities, and the rates could increase to keep demand in check.
On the flip side, if the market slows down or corrects itself, that could help stabilize rates. The big question for 2024 is whether demand will stay high, cool off, or find some balance.
Expert Predictions for Mortgage Rates in 2024
With mortgage rates continuing to decrease, we can look forward to even higher savings as 2024 comes to a close.
Most experts agree that September’s recent reduction to 4.25% will decrease a further 0.25% before the year finishes.
Let’s explore some other predictions.
Predicted Fixed-Rate Mortgages for 2024
Prospective buyers often prefer fixed mortgage rates as they offer more stability. These rates can fluctuate depending on the economic situation.
Most experts believe that fixed rates will remain stable, but there’s always a risk of minor increases should changes occur.
Predicted Variable-Rate Mortgages for 2024
Unlike fixed-rate mortgages, variable-rate mortgages are more reliant on the Bank of Canada’s monetary policy. The continued decrease in interest rates makes mortgages more affordable, and we can expect them to reduce further by the end of December.
There’s no way of predicting the future, and prospective buyers will still need to weigh the potential risks before deciding.
Alternative Mortgage Options
Some experts also recommend unconventional mortgage financing options, including specialized and hybrid products.
While these products aren’t popular yet, they could gain traction in the future.
How Rising (or Falling) Mortgage Rates Could Affect Homeowners
So, how will changing mortgage rates impact homebuyers and current owners?
Well, it depends on your unique situation, but we can look at predictions to understand what will happen.
Mortgage Rate Impact on First-Time Homebuyers
First-time buyers often feel like they’re swimming against the tide when trying to find a property, and changing mortgage rates doesn’t exactly help.
Higher rates make monthly mortgage payments more expensive for first-time buyers, but they can also reduce demand, which puts you in a more competitive position.
Lower rates are best for saving money but also mean that the housing market sees more activity, making it harder to secure a property.
Mortgage Rate Impact on Current Homeowners and Refinancing
Fluctuating interest rates can impact current homeowners, especially if they’re on a variable-rate deal.
One of the best ways to lock in favourable rates is to refinance before the end of 2024. That way, you can lock in lower rates and avoid paying more interest.
Mortgage Rate Impact on Real Estate Investors
Fluctuating interest rates can also deter investors because higher rates mean the property will cost more.
Investors interested in multi-property portfolios might still find some excellent opportunities, even if the market cools, as properties will have lower prices due to less demand.
Useful Strategies for Homebuyers and Homeowners in 2024
It might be October, but that doesn’t mean there aren’t plenty of opportunities for homebuyers and homeowners.
By considering your options and being willing to act quickly, you still have time to secure a new mortgage, refinance your current one or move into your very first property.
Here are some great strategies to make it happen.
Locking in a Rate Before Potential Increases
While there’s every reason to expect rates to decrease again by the end of 2024, there’s no telling what 2025 will hold.
Locking in a fixed-rate mortgage gives you security and peace of mind for the coming months. Beginning your mortgage application and getting pre-approved means you won’t have to worry about changing rates.
Remember, if rates continue to decrease into 2025, you could miss out on huge savings.
Managing Payments with a Variable Rate Mortgage
If you’ve got a variable-rate mortgage, planning ahead for whatever the Canadian economy throws at you is vital.
Building a budget that can handle possible increases is key, and keeping an eye on when it might be smart to switch to a fixed rate can help soften the blow of rising rates.
Utilizing Rate Predictions to Plan Home Purchases
Timing the market is no easy feat, but using rate forecasts can help you decide when to purchase a home. When specialists predict rising rates, buying a property immediately can prevent extra costs.
On the other side, prospective buyers can wait for the market to cool down and save money
Key Risks and Uncertainties for Mortgage Rates in 2024:
Economic Uncertainty
Inflation continues to be a concern, and its impact on mortgages is somewhat unpredictable.
We saw how quickly COVID-19 impacted the economy; another downturn could lead to further inflation.
Government Housing Policy Changes
It’s also essential to remember that changes to incentives and housing regulations could cause issues with mortgage rates.
The government introduced positive initiatives for first-time buyers in 2024, but 2025 might bring better grants or incentives.
Consult With A Victoria, BC Mortgage Broker
Figuring out mortgage rates in 2024 can be tricky, but having the right help can make all the difference. As specialist mortgage brokers in Victoria, BC, we can offer advice tailored to your unique financial situation.
Whether you’re buying your first home, refinancing your existing mortgage, or making an investment, our experts have access to a network of specialist lenders.
Please begin your mortgage application today or contact us if you have any questions.
