While the Bank of Canada is predicted to lower its key interest rate by 2-2.5 percentage points in the coming year, fixed mortgage rates are anticipated to decrease more moderately due to bond market fluctuations. Analysts suggest that recent economic indicators and inflation data may influence future rate movements.
The Bank of Canada is widely expected to cut its headline interest rate by an additional 2 or 2.5 percentage points in the coming year, but fixed rates for five-year and three-year mortgages will likely drop by much smaller amounts.
But in the last couple weeks, the bond market saw a small rebound as the U.S. economy showed unexpected strength, and there’s some debate as to what it all means going forward. Mortgage rates for five-year fixed terms are floating just above the 4-per-cent mark at many financial institutions in early October; rates under 4 per cent were available at some institutions in September. Mr. Kavcic and other experts expect that five-year rates will bottom out somewhere between 3.5 and 4 per cent in 2025.
“It’s important for the Canadian consumer to realize there’s not going to be a 2.9 per cent rate this year or next year, it’s not in the cards,” said Mr. Butler. “When you get mortgage rates at something below 4 per cent, I don’t want to say it becomes affordable or overly compelling for an investor, but at least it’s not completely unreasonable any more at that level,“ said Mr. Kavcic.Mr. Butler said people who are purchasing now should seriously consider variable-rate mortgages, if their financial situation can handle the risk associated with them.
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