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Bank of Canada Interest Rate Trends and Impact on Montreal Mortgages in 2024
October 17, 2024 | Posted by: Yelena Markus
The latest economic update from the Bank of Canada (BoC) brings a 25-basis-point reduction, bringing the policy rate to 4.25%. This decision signals a potential shift towards a more favorable borrowing environment. However, the effects of interest rate changes can take time—up to four fiscal quarters—to filter through the economy.
The Effect of Interest Rates on Canadian Mortgages
Homeowners across Canada are now feeling the cumulative impact of 10 rate increases imposed by the BoC since 2022. With nearly 2.2 million mortgages set for renewal in the next two years, many borrowers are bracing for higher interest costs. These changes will especially affect homeowners in Montreal, where mortgage renewals are becoming a growing concern.
Key Highlights for Borrowers in Montreal:
- Current prime rate: 6.45%
- Inflation: 1.6%, showing signs of stabilization
- BoC policy rate trend: The first rate cut in over a year, with more reductions expected
2024 Mortgage Rate Forecast: A Glimmer of Relief?
For Montreal buyers and homeowners, the forecast for 2024 suggests more rate cuts may be on the horizon. Major financial institutions predict that the BoC could lower rates by 75 to 100 basis points throughout the year. This could provide much-needed breathing room for those renewing mortgages or entering the housing market.
However, forecasts are subject to economic developments, including inflation, geopolitical tensions, and employment trends. It is crucial to stay updated with these changes, especially if you are planning to refinance or purchase a home.
Will Interest Rates Keep Decreasing in 2024?
The Big 6 banks have expressed optimism that rates will continue to drop steadily throughout 2024, with cuts of 25 basis points per announcement. The BoC Governing Council recently indicated that monetary policies might shift towards easing as inflation moves closer to the 2% target.
Despite this positive outlook, certain factors may slow rate reductions, including:
- Potential geopolitical conflicts or shocks
- Stubborn inflation in specific sectors, such as rental costs
- Labor market dynamics influencing inflation
How Could Montreal's Real Estate Market Respond?
The effects of higher interest rates have already slowed housing sales in Montreal, with some sellers struggling to meet buyers' affordability expectations. The forecast suggests that home sales will improve by 5.2% in 2024, provided that mortgage rates decrease as anticipated.
If borrowing costs become more favorable, prices may stabilize, encouraging more buyers to enter the market. Current predictions indicate a slight increase in average home prices by 0.9% to $683,200 by year-end. Montreal's market could experience more robust growth in 2025, with an estimated 4.4% rise in average prices, bringing them closer to $713,375.
Should Montreal Homeowners Expect Another Rate Hike?
The likelihood of further BoC rate hikes in 2024 appears slim. Experts believe the central bank will focus on gradual rate reductions to balance economic growth and inflation control. Still, homeowners should stay informed, as rental costs and inflation pressures may challenge the BoC’s ability to reduce rates rapidly.
Key Dates to Watch: Bank of Canada Announcements
Mark your calendar for the next Bank of Canada rate announcement on October 23, 2024. While some forecasts suggest another 25-basis-point cut, the BoC may also pause rate changes if inflation shows signs of resurgence.
Long-Term Mortgage Strategy in Montreal
As a mortgage broker in Montreal, I help homeowners and first-time buyers navigate these dynamic market conditions. My role is to secure competitive mortgage solutions while considering the evolving interest rate environment. The goal is to align your mortgage strategy with market trends to minimize your costs and ensure financial stability.
Planning to renew your mortgage or purchase a home? I’m here to assist with everything from mortgage pre-qualification to refinancing options, ensuring that you make informed decisions at every stage.
Secure Your Financial Future with Yelena Markus
Montreal’s real estate market may fluctuate, but with the right strategy, you can stay ahead. Contact me, Yelena Markus, for a personalized mortgage consultation and explore how the latest market trends can work to your advantage.
Let’s discuss how rate cuts, refinancing, or mortgage renewals can shape your financial journey. Together, we’ll find the best mortgage solution tailored to your needs!
