Markets expect central banks to cut interest rates next year, with some fixed mortgage rates at their lowest in months. But with so much economic uncertainty, new buyers and homeowners needing updates are still having to make difficult decisions.
Since the beginning of 2022, mortgage interest rates in Canada have skyrocketed due to the Bank of Canada’s interest rate hike. But for the first time since May, some lenders are offering insured five-year fixed mortgages with interest rates below 5%.
This is due to a drop in bond yields and is a reaction to the US Federal Reserve’s announcement last week suggesting three interest rate cuts in 2024, which is in line with other central banks around the world such as the Bank of Canada. It could also mean lower interest rates.
“Employment numbers are expected to increase in 2024 and we’re seeing inflation fall to 3.1 per cent,” Ottawa-based mortgage broker Frank Napolitano told CTV News. he said. “As a result, bond markets have shifted to the outlook for interest rates to fall in 2024.”
He added: “I think first-time home buyers are sitting on the sidelines. With interest rates coming down, I think this is the optimism they were looking for.”
Rising mortgage rates are putting pressure on homeowners and creating obstacles for potential buyers. David Speakman, an Ottawa resident who has been waiting two years to buy a home, said despite the rate cut on his fixed mortgage, he plans to take advantage of a variable rate in anticipation of further rate cuts.
“My feeling is that variable rates will fall faster than fixed rates in the near future, and will probably be lower than fixed rates for more than half the term of the mortgage, so you’ll save some money in the long run. ‘It’s money,’ he told CTV News.
Most mortgage brokers expect interest rates to fall, but not to the low of 1.39% seen during the pandemic.
“I encourage all Canadians to keep saving. Even if interest rates were to drop another quarter of a percentage point, or half a percentage point, or even a percentage point, it would still be very unaffordable for many Canadians.” ,” said Victor Tran, mortgage and real estate expert at Ratesdotca. he told CTV News Channel on Wednesday. According to RBC, approximately 60% of Canadian mortgages are due for renewal in the next three years, putting millions of homeowners at risk of shocking price increases when their fixed-rate mortgages come up for renewal. That’s what it means.
“Is 4% a significant relief for someone who has a fixed interest rate of 2.5%? You know, it’s better than 6%, but it’s not going to be much relief for those borrowers.”Vancouver says Andy Hill, a mortgage broker based in . said in an interview with CTV News. “No matter how high interest rates rise, there will definitely be a renewal shock.”
And while the bond market expects interest rates to fall, that doesn’t guarantee a cut. The Bank of Canada says it still needs several months of data to confirm that inflation is trending down. on the other hand, Tuesday’s report by Scotiabank economist Derek Holt. He said Canada’s inflation statistics are “leaning more towards rate hikes than rate cuts.”
“Everyone is starting to take a victory lap, but if inflation returns, interest rates could be quite high for a long period of time, and I think that’s the big risk today,” Hill said.