As 2024 ends, Canadians with impending renewals want to know if they are as doomed as the media has made them out to be.
As your local Kamloops Mortgage Broker, let’s review the facts. The Canadian mortgage fixed interest rate market has entered a new phase characterized by modest fluctuations and a cautious outlook influenced by domestic economic conditions and global bond markets. Let’s discuss the current landscape, key influencing factors, and forecasts for the near future.
Current Landscape
In October 2024, fixed mortgage rates in Canada generally range from approximately 4.25% to 5.25%, depending on the lender and the borrower’s credit profile. This marks a decline from the higher rates seen in 2023, mainly due to a stabilization of inflation and shifts in monetary policy. The Bank of Canada (BoC) has opted for a more accommodative stance, signalling a pivot after a prolonged period of rate hikes. The most recent decisions by the BoC reflect a cautious approach, balancing the need to manage inflation with the risk of stifling economic growth.
Influencing Factors
Central Bank Policies: The BoC has maintained its key interest rate stable, indicating that future adjustments will be data-dependent. Recent economic indicators suggest that inflation is under control, hovering around the 2% target, which has alleviated some pressure on the BoC to implement further rate hikes. This stability has contributed to the gradual decline in fixed mortgage rates.
US Bond Yields: The dynamics of US Treasury yields continue to play a pivotal role in shaping Canadian mortgage rates. As of October 2024, US yields have moderated after reaching recent highs due to economic data and the Federal Reserve’s approach to interest rates. A slight decline in US yields has allowed Canadian rates to follow suit. However, any resurgence in US yields could still exert upward pressure on Canadian fixed mortgage rates.
Economic Indicators: Domestic economic factors, such as employment rates, consumer spending, and housing demand, also significantly influence mortgage rates. Canada’s economy has shown resilience, with steady job growth and increased consumer confidence contributing to a more favourable housing market. However, rising housing prices and demand can create localized upward pressure on mortgage rates.
Global Economic Conditions: Geopolitical events and global market trends remain critical. Factors like oil prices, international trade agreements, and foreign investment flows can lead to volatility in bond yields and mortgage rate. Any disruptions in global supply chains or commodity markets could influence Canadian and US bond markets.
Forecast
Looking ahead to 2025, several trends are expected to shape the fixed interest rate landscape in Canada:
Continued Stability: Many analysts forecast that fixed mortgage rates will remain relatively stable, with slight fluctuations expected in the 4% to 5% range for most of 2025. The BoC will likely maintain its current rate, barring significant inflation or economic growth changes.
US Bond Yields as a Key Variable: The future trajectory of US bond yields will be critical. If the Federal Reserve signals a tightening policy or inflation pressures resurface, US yields could rise again, potentially influencing Canadian rates upwards. Conversely, if the US economic outlook remains stable with subdued inflation, Canadian rates could benefit from this environment.
Consumer Demand and Market Sentiment: The housing market’s response to interest rate trends will also be pivotal. If consumer confidence grows, increased demand could lead to upward pressure on fixed mortgage rates, especially in urban markets with limited housing supply.
Conclusion
As of October 2024, the Canadian fixed mortgage interest rate market is in a state of cautious optimism. With rates stabilizing and the BoC adopting a measured approach to monetary policy, potential homebuyers may find favourable conditions in the coming months. However, close attention must be paid to US bond yields and global economic developments, as these factors will undoubtedly influence the trajectory of fixed mortgage rates in Canada. For prospective buyers and investors, staying informed will be essential in navigating this evolving landscape.
Whether you are entering the market or making another investment, it is wise to consult a mortgage professional. Let’s chat.
