Last Updated: April 10, 2024
Interest rate forecast for 2024: 5.00%*
For more information about the 2024 Bank of Canada rate announcement schedule, read more here 👈
Key Takeaways (updated April 2024)
- The prime rate in Canada as of April 10, 2024 is 7.20%. (last change: +0.00% on April 10, 2024)
- On Wednesday, April 10, 2024, The Bank of Canada announced that it will be holding its rate, keeping the policy rate at 5.00%.
- Recent data indicates inflation is decelerating toward the Bank of Canada’s target, coupled with slow economic growth.
- Today’s best mortgage rates are 4.80% for 5-year fixed and 6.10% for 5-year variable.
- February consumer price index, the measure for year over year inflation, came in at +2.8%, following January’s +2.9%.2024 Predictions (updated March 2024)
2024 Predictions (updated April 2024)
- For the month of April, Perch anticipates fixed rates will drop and variable rates will remain the same.
- Markets and Senior Economists are largely convinced there are no more rate hikes in the pipeline for Canadians and expect two 0.25% cuts to occur in the second half of this year and cumulative cuts of 2% by the end of 2026.
- The Bank of Canada has seen inflation trend in the right direction, but it’s still not quite low enough. Markets expect inflation to continue it’s downward trend and the first cut is expected in June to stabilize inflation in the target range and prevent inflation from decelerating past their target range.
Will Interest Rates in Canada Go Down in 2024?
On March 6th, the Bank of Canada held its interest rate at 5.00%. The next Bank of Canada announcement is scheduled for April 10, 2024.
Commentary from Perch’s CEO and Principal Mortgage Broker, Alex Leduc:
When is the next Bank of Canada rate increase and what can I expect?
The current market overnight interest rate forecast for the remainder of 2024 is:| Variable Rate Interest Forecast 2024 to 2028 (as of April 2024) | |
|---|---|
| Date | 5-year variable rates |
| 3/31/24 |
6.10% |
| 6/30/24 |
6.20% |
| 12/31/24 |
5.68% |
| 6/30/25 |
5.16% |
| 12/31/25 |
4.67% |
| 6/30/26 |
4.61% |
| 12/31/26 |
4.29% |
| 6/30/27 |
4.34% |
| 12/31/27 |
4.13% |
| 6/30/28 |
4.39% |
| 12/31/28 |
4.28% |
| 6/30/29 |
4.50% |
| 12/31/29 |
4.45% |
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What is the interest rate forecast for 2024 in Canada? (updated April 2024)
Commentary from Ali Hussin, Head of Mortgage Advisory at Perch:
On April 10th, The Bank of Canada published their decision to continue to hold their policy interest rate at 5%. With 5 consecutive rate holds, markets and the Central Bank are convinced there’s clear evidence pointing to slowing demand and an economy in modest excess supply, led by slower consumption growth and a decline in housing activity. Markets and Senior Economists are largely convinced there are no more rate hikes in the pipeline for Canadians and expect two 0.25% cuts to occur in the second half of this year and cumulative cuts of 2% by the end of 2026.
For the month of April, we anticipate fixed rates will continue to decrease and variable rates will remain the same.
Commentary from Alex Leduc, Principal Mortgage Broker and CEO of Perch:
January through March of this year has been relatively constant. The market currently expects two 0.25% cuts to occur in the second half of this year and cumulative cuts of 2% by the end of 2026.Â
The Bank of Canada has seen inflation trend in the right direction, but it’s still not quite low enough. Markets expect inflation to continue it’s downward trend and the first cut is expected in June to stabilize inflation in the target range and prevent inflation from decelerating past their target range.
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How does inflation affect future Bank of Canada interest rate changes?
February consumer price index, the measure for year over year inflation, came in at +2.8%, following January’s +2.9%. Excluding gasoline, the headline CPI slowed year over year, to 2.9% in February from 3.2% in January. Canadians continued to battle elevated shelter costs in February (+6.5%), with the largest contributor being mortgage interest costs (+26.3%), notably, mortgage interest rates has been and continues to apply the highest upward pressure on the CPI since December of 2022. The Central Bank sees tightening household discretionary spending as their most viable tool to halt consumer spending on goods and services and attain their 2% inflation target, the CPI dropped below the 3% mark as we predicted in our previous monthly report, we’re expecting further drops until the 2% mark is reached around May, after which the Bank of Canada may need to move quickly to avoid a deflationary scenario, the next slated CPI announcement will be on April 16th.
What is CPI and how does it affect the Canada interest rate forecast?
CPI stands for consumer price index and it is the measure of average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is mainly used to measure inflation. A rising Consumer Price Index (CPI) would prompt the central bank to raise interest rates. The CPI basket includes 8 main categories of goods and services: Food, Shelter, Household operations, Clothing, Transportation, Health, Recreation, and Alcoholic beverages. CPI data is reported for various geographic areas, including Canada, provinces, and select cities, such as Whitehorse, Yellowknife, and Iqaluit.
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What affects the Bank of Canada’s interest rate forecast?Â
The Bank of Canada’s interest rate forecast is influenced by a variety of financial, economic and geopolitical factors. Some of these include economic growth, inflation, labour market conditions, global economic conditions, consumer spending and more. Here are some recent numbers that will affect the Bank of Canada’s interest rate forecast decision:
- February consumer price index, the measure for year over year inflation, came in at +2.8%, following January’s +2.9%. Excluding gasoline, the headline CPI slowed year over year, to 2.9% in February from 3.2% in January. Canadians continued to battle elevated shelter costs in February (+6.5%), with the largest contributor being mortgage interest costs (+26.3%), notably, mortgage interest rates has been and continues to apply the highest upward pressure on the CPI since December of 2022. The Central Bank sees tightening household discretionary spending as their most viable tool to halt consumer spending on goods and services and attain their 2% inflation target, the CPI dropped below the 3% mark as we predicted in our previous monthly report, we’re expecting further drops until the 2% mark is reached around May, after which the Bank of Canada may need to move quickly to avoid a deflationary scenario, the next slated CPI announcement will be on April 16th.
- Canada added 41,000 jobs in February, following 37,000 jobs in the first month of 2024, Job gains were spread across several industries in the services-producing sector, with the strongest employment growth in accommodation and food services. Population growth continues to outpace the labour market and prop up an otherwise cooling job market. Furthermore, we saw the unemployment rate increase by 0.1% in February to 5.8% after a brief drop in January to 5.7%, once again fueled by stronger population growth.
- Canada’s 5-year bond yields have continued to move downward since they reached 16-year highs during the month of October. Canada’s mortgage rates tend to track five-year bond yields at a premium and with a lag. Yields dropped due to a growing consensus that interest rates remaining elevated long than anticipated and a hard Canadian recession fear all but diminished as the Canadian economy is now expected to be in a mild recession after a negative Q3 and flat Q4 results.
Alex Leduc
Alex Leduc is Founder and CEO at Perch. Prior to starting Perch, he worked in the real estate sector for 8 years in corporate finance, strategy and analytics roles. He is currently a Technical Advisory Committee Member of the Financial Services Regulatory Authority of Ontario (FSRA) and Co-Chair of the Canadian Lenders Association Mortgage Roundtable. Alex is a graduate of Ivey Business School from Western University and a CFA Charterholder. LinkedIn
What is the Canadian prime rate?
The prime rate is what major banks and financial institutions in Canada use to set interest rates for loans and lines of credit which also include variable rate mortgages.
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Is prime rate the same as mortgage rate?
The prime rate is not the same as your mortgage rate. A prime rate is the base cost of borrowing from which lenders start to determine interest rates on mortgages, personal loans, credit loans or other financial products. In general, the prime rate mostly affects variable rate mortgages. Your mortgage rate is the interest rate you are expected to pay on any borrowed money.
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What is the mortgage interest rate forecast for 2024 in Canada?
On April 10th, the Bank of Canada announced a rate hold, keeping the interest rate at 5.00%.
Our current best 5-year fixed rate is 4.80% and 5-year variable rate is 6.10%.
Markets and Senior Economists are largely convinced there are no more rate hikes in the pipeline for Canadians and expect the first rate drop to come as soon as April or June. The Central Bank forecasts a continued cooling of the economy, aiming to bring inflation back to its two percent target by early 2025.
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What are the interest rate predictions from the banks?
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CIBC
CIBC Capital Markets anticipates the Bank of Canada maintaining interest rates for now but foresees potential rate cuts in June, totalling up to 150 basis points throughout the year to stimulate the economy. The Bank of Canada’s recent statement reflects a shift away from considering rate hikes, focusing instead on managing persistent core inflation concerns. Aaron Young from CIBC Asset Management highlights the Bank of Canada’s explicit indication against further rate hikes currently, suggesting rate cuts may come in the latter half of 2024 due to lingering inflationary pressures. CIBC Asset Management remains poised for interest rate volatility ahead and offers investment guidance tailored to individual needs.Â
RBC
RBC economists say that The Bank of Canada is likely to keep interest rates unchanged for the sixth consecutive time, with the policy statement expected to leave room for future rate cuts. While GDP growth in early 2024 surpasses expectations, other economic indicators such as labour markets and business bankruptcies have softened. Inflation remains within the target range, giving the BoC flexibility, but overall economic data suggests a potential shift to rate cuts around mid-year.
Scotiabank
Scotiabank economist, Derek Holt, says “No policy rate change is expected and they’ve ruled out changes to quantitative tightening for now. Key will be the bias, and on that, they should be exceptionally careful.
It’s been a tough stretch for the Bank of Canada’s forecasts. Developments since they last forecast back in January have just been too darn rosy relative to the BoC’s gloom in order to merit a dovish pivot any time soon”.
TD Canada
TD Bank senior economist James Orlando’s long-term forecast is as follows:
- Following an economic slowdown in 2024 and subsequent rebound in 2025 and 2026, long-term Canadian GDP growth is expected to stabilize around 1.8% annually. This will be driven by solid population and labour force growth, while productivity growth lags behind.Â
- Consumer spending will undergo a period of below trend growth through 2026, as Canadian households save more in the face of high mortgage debt.Â
- Business investment is expected to grow above trend over the forecast horizon. The need to build more homes will boost residential investment, and the opportunity to fast track the clean energy transition will cause a lift to investment in structures, machinery, and equipment.Â
- After a period of high inflation, we expect headline and core consumer price inflation to decelerate back to the 2% target over the medium term.
- With inflationary pressures easing over the medium term, the Bank of Canada will be able to cut its policy rate back to the neutral rate of 2.25% by 2025. We expect the loonie to return to the 80 U.S. cent level once Canadian economic growth is able to catch up.
BMO
BMO economist, Douglas Porter, has stated that “while there’s not much debate that the Bank will hold rates steady again at 5%, there’s a lot of debate over just how dovish they will sound. Even with a moderate upgrade in the 2024 growth outlook (the BoC was previously at 0.8%, we’re now at 1.2%), inflation is nicely tracking below their estimate of 3.2% for Q1 (likely 2.9%), so we look for the Bank to open the door a crack for coming rate cuts”.
