Mortgage interest rates weigh heavily on the decisions Canadians make when buying a home or renegotiating their mortgages. Over time, even the smallest difference in interest can have a significant impact on overall costs, so it’s important to know what to expect from the market over the course of the next year. Experts have made predictions regarding Canada’s mortgage rates, 2024 being touted as having the potential to finally free consumers from rampant inflation.

In general terms, interest rates tend to grow as the economy booms; they usually stabilise during times of low economic growth. Post-Covid mortgage rates in Canada have risen as many sectors of the nation’s economy recovered, with policy makers raising rates to a high not seen since 2001. For most of us, the cost of living has increased to astonishing levels throughout Canada. Real estate markets have eventually fallen to keep pace with our tightened budgets.

Despite the costs and high rates, we’re seeing right now, financial experts are expecting market stabilisation and lowered interest rates to appear in 2024 and beyond for the next 5-10 years. According to forecast interest rates by the CIBC, however, these interest rate cuts aren’t expected to take place until the summer of 2024 at the earliest. So, if you’re hoping to buy some real estate, 2024 should have lower rates going into the second half of the year. The same goes for rates on remortgaging a property or consolidating your loans.

Canada’s 5-year fixed-rate mortgage rates are currently lower than the nation’s variable mortgage rates, which means a bit of a headache for people currently holding variable rate mortgages and wondering when or whether to lock them in for a 3- or 5-year term. Both variable and fixed rates are expected to lower by the end of 2024, so while it seems advisable to wait to lock in a rate or renegotiate your mortgage at that time, the best course of action really depends on your current rate.

Investing in real estate 2024

Run the numbers. How much will you spend in interest in the next three to five years if you lock down your current variable rate? Is it more than you’d expect to spend riding the 6–12-month wave of increases and then looking for a lower fixed rate? These can be tough questions to answer, but if you look at the more than three percent increase in Canada’s prime rate over the last year, you’ll be able to make some useful comparisons.

Remember that you can opt to lock-in a current rate with a bank lender now while you look for a house and use that rate when purchasing a few months from now. Locking in rates can be a good strategy when you’re absolutely sure that you will make a house purchase, and mortgage rates are consistently moving up. Make sure that if you set up this type of arrangement there are no complicated stipulations that may negate the contract! It needs to be solid since you’ll pay a lock-in fee. If you have trouble understanding a locked-in rate contract, you can hire a real estate lawyer to double-check everything.

CPI: Making predictions about Canada’s mortgage interest rates

In Canada, mortgage interest rates (2024 and further in the future) are predicted to be moving downwards based on various financial models, including Canada’s CPI. The finance industry uses the Consumer Price Index to understand the current state of the Canadian economy and monitor changes in pricing for the average Canadian. They do this by consulting a theoretical basket of goods and services (the CPI basket) that remains the same over time but fluctuates in total cost. Inside the CPI basket are items that represent shelter, transportation, food, household operations, recreation, recreational substances, health and clothing.

As the cost of this theoretical basket of goods and services (also understood as the average cost of living) stabilises, we can expect to see spending increase in other ways, such as in real estate or recreation. From 2021 to 2022, the total cost of the CPI basket increased by more than 8 percent; between 2022 and 2023, however, the total cost has only increased by about 4 percent from the year before. This decrease in inflation suggests an overall settling of Canada’s inflation rates and therefore a decline in mortgage rates.

Niagara Real Estate 2024

Home values in the Niagara region remain relatively affordable, especially when compared with prices in nearby Toronto. If you’re thinking about buying or selling property in Niagara-on-the-Lake, St. Catharines, Niagara Falls or elsewhere in southern Ontario, get in touch! McGarr Realty is a boutique real estate brokerage that can help you through every step of the process and show you options you may have otherwise missed.

We look forward to speaking with you!

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