Read the 2024 interest rate forecast.

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Key Takeaways

• Our current best 5-year fixed rate is 4.29% and 5-year variable rate of 5.55%.
• For September, we anticipate fixed rates will continue to decrease mildly and variable rates will drop following an expected 0.25% rate cut by the Bank of Canada on September 4th.
• For first-time home buyers, there are some great opportunities, sellers are coming to terms with tapering price growth as higher interest rates have barred many from entering the market, inventory is increasing (especially for condos) and should remain elevated for the next few months until more mortgage rate drops prompt sideline buyers to enter the market.
• For homeowners who are coming up for renewal, our Mortgage Renewal Calculator can help you plan ahead to get a sense of what rate you can expect from your lender at renewal, what your new payment would look like, and how Perch can help.
• For homeowners who would like to be automatically notified when there’s a benefit to switching lenders and breaking their mortgage early, Perch automatically calculates the net benefit on a weekly basis for all your existing properties. Make sure to sign up for your free profile today.

Mortgage Rates Prediction

For the month of September, we anticipate fixed rates will continue to decrease mildly and variable rates will drop following an expected 0.25% rate cut by the Bank of Canada on September 4th.

Canada’s bond yields (which influence fixed mortgage rates) have continued to move downward as shown below:

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Bank of Canada rate announcement

We look at some of the core factors that the Bank is monitoring to gauge which direction they are likely to go. In this case, all indicators justify a cut, which makes it very likely.

• • GDP Growth: The Bank of Canada is expecting GDP growth of 1.20% for 2024. According to Trading Economics, July 2024 came in at 0% and is below expectations.
  • Inflation: Both core and regular CPI trended downward in August to 1.7% and 2.4% respectively, in line with the Bank’s 2% inflation target.
  • Unemployment: Relative constant the past months at 6.4%, the Bank of Canada has signalled they think this is a good level as it indicates slack in the labour market and wage growth is not unreasonably high.

Buyer Mortgage Balances Prediction

We believe that non-apartment/condo properties will experience flat price movements and apartment/condo prices in major markets will likely face lower prices until excess inventory is absorbed (great article to read about this for Toronto here). This should lead to a lower mortgage balance and as a result lower mortgage payments.

Home Prices

As a general rule of thumb, a sales to new listings ratio (SLR) above 60 is deemed a seller’s market, below 30 is a buyer’s market, and between the two is a balanced market. In a seller’s market, prices are usually rising due to demand outstripping supply available and in a buyer’s market prices are declining due to supply of new listings being greater than the demand from buyers.

Canada as a whole has moved into a balanced market as shown by CREA below with an SLR of around 52.

However, this is the National average and some cities have trended well below the average. For example, according to HouseSigma, the Greater Toronto Area is a buyer’s market with an SLR of 20.

The SLR for condos is even worse since there has been a flood of new inventory related to new projects hitting the market.

According to CREA, the National Composite MLS Home Price Index (HPI) edged up 0.2% from June to July. While a small increase, it was slightly larger than the June increase, making it just the second, and the largest, gain in the last year.