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.

What is the mortgage interest rate forecast for 2024 in Canada?

On September 4th, the Bank of Canada cut its interest rate to 4.25%. The next Bank of Canada announcement is scheduled for October 23, 2024. Commentary from Perch’s CEO and Principal Mortgage Broker, Alex Leduc: The Canadian economy is showing signs of weakness and inflation has come in a bit under expectations, which prompted the Bank of Canada to feel comfortable administering more monetary loosening by cutting rates.

How are bond yields related to fixed mortgage rates?

Banks will originate mortgages and then pool a bunch of them into what is called a mortgage backed security (MBS) to be sold off to investors (someone like a pension fund for example) who collect a yield on the MBS. The pension fund could invest in other fixed income investments, so mortgage rates rise as a result to entice investors to keep buying the MBS. lBond yields and mortgage rates move in the same direction.

What are the interest rate predictions from the banks?

CIBC CIBC 's economists say that the July 24th rate cut was widely expected. “Markets had priced in a very strong probability of a rate cut,” says Michael Keaveney, Vice President, Managed Solutions, CIBC Asset Management. “This expectation was driven by recent reports of weakness in Canadian retail sales, continued low business sentiment around future sales growth, and easing labour markets which may result in reduced wage growth pressures.” RBC RBC economists say that "the interest rate cut today from the Bank of Canada marks a continuation in the central bank’s effort to lower interest rates back towards “normal” levels, amid signs of slowing inflation. The BoC highlighted parts of the economy that are still seeing abnormally high pressure in price growth, but also thinks a weaker economic and labour market backdrop, as well as increased excess supply should continue to propel inflation back towards the target level this year and next. Against that backdrop, our expectation remains that there will be two additional rate cuts this year, one at each meeting after today’s meeting that will lower the overnight rate to a still restrictive 4% by the end of 2024". Scotiabank Scotiabank economist, Derek Holt, says that the cut from the BoC was expected and that further cuts are likely. Scotia Economics forecasts two more cuts in September and October. In Holt's forecast, he also notes that the Bank of Canada (BoC) assumes that potential GDP growth is faster than actual GDP growth due to population growth, expecting this to create excess capacity and disinflationary pressure. However, the BoC treats all forms of population growth equally, overlooking that nonpermanent residents, such as international students and temporary foreign workers, do not contribute equally to potential output. Furthermore, with Ottawa's target to reduce the nonpermanent resident category, the BoC relies on an optimistic assumption that productivity will offset the lower population growth, despite downgrading their productivity growth forecasts. This leads to an overestimation of supply-side growth and misjudgment of labor market slack, as non-permanent residents have driven the rise in the unemployment rate. The BoC's inconsistent narrative on immigration's effects adds to the concern, as they oscillate between viewing newcomers as net demand pressures and believing their supply and demand effects cancel out. TD Canada The Bank of Canada (BoC) cut its policy rate by 25 basis points to 4.50%, marking its second consecutive rate cut. This move signals the BoC's commitment to easing rates, with markets anticipating further cuts by the end of the year. Inflation has remained below 3% year-on-year for six months, but core inflation measures have recently accelerated. The BoC's messaging now emphasizes downside inflation risks and the need for a less restrictive rate environment. Economic forecasts predict a soft landing with modest GDP growth adjustments. The BoC's next rate announcement is on September 4th, with future decisions depending on inflation and labor market conditions. BMO BMO economist, Douglas Porter, has stated that "The door is still open for additional cuts, and September is very much on the table if the next core CPI print behaves (think +0.2% m/m or lower). The tone of today's many remarks almost seems to suggest that the Bank now needs to be convinced not to keep trimming rates. We continue to look for two more rate cuts before the end of 2024, taking the overnight rate down to 4%, with the precise timing over the next three meetings driven by the incoming data—with CPI on centre stage, but the unemployment rate now dancing close to the limelight as well".

How does the overnight rate affect the prime rate?

When the Bank of Canada raises the overnight rate, it becomes more expensive for banks to borrow money. This will result in banks raising their prime rates to cover the added costs. If the Bank of Canada lowers the overnight rate, banks usually will lower their prime rates.

How will the latest Bank of Canada interest rate announcement impact your monthly mortgage payments?

For variable rate mortgages (meaning your payments don’t fluctuate as prime rates change): The September 4th decrease means that less of your existing mortgage payments go towards the interest portion of your mortgage as your amortization decreases, but your payments will stay the same. Use our Mortgage Renewal Calculator to get an estimation of what your expected rate and payment will be at your maturity date. If the payment isn’t manageable, connect with your advisor well in advance to look at all options. For adjustable rate mortgages (meaning your payments fluctuate as prime rates change): The latest cut will further decrease your mortgage payments and the outlook shows that further cuts from the Bank of Canada are expected throughout 2024 and into 2025 to further reduce your mortgage payments.`

2024 Key Takeaways (updated September 2024)

The prime rate in Canada as of September 4, 2024 is 6.70%. (last change: -0.25% on September 4, 2024) On Wednesday, September 4, 2024, The Bank of Canada announced that it will be cutting its rate, bringing the policy rate to 4.25%. Recent data indicates inflation is decelerating toward the Bank of Canada’s target, coupled with slow economic growth. Today’s best mortgage rates are 4.30% for 5-year fixed and 5.55% for 5-year variable.

2024 Predictions (updated September 2024)

The Canadian economy continues to show signs of weakness and inflation is trending towards the 2% target, which prompted the Bank of Canada to feel comfortable administering more monetary loosening by cutting rates.

What affects the Bank of Canada’s interest rate forecast?

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.

Will Interest Rates in Canada Go Down in 2024?

On July 24th, the Bank of Canada cut its interest rate to 4.55%. The next Bank of Canada announcement is scheduled for September 4, 2024. Commentary from Perch’s CEO and Principal Mortgage Broker, Alex Leduc: The Canadian economy is showing signs of weakness and inflation has come in a bit under expectations, which prompted the Bank of Canada to feel comfortable administering more monetary loosening by cutting rates.

What is the mortgage rate forecast for 2024?

On September 4th, the Bank of Canada cut its interest rate to 4.25%. The next Bank of Canada announcement is scheduled for October 23, 2024. Commentary from Perch’s CEO and Principal Mortgage Broker, Alex Leduc: The Canadian economy is showing signs of weakness and inflation has come in a bit under expectations, which prompted the Bank of Canada to feel comfortable administering more monetary loosening by cutting rates.

Perch | Canada Interest Rate Forecast 2024-2028

Variable Rate Interest Forecast 2024 to 2028 (as of October 2024)
Date	5-year variable rates
9/30/24	5.30%
12/31/24	4.67%
6/30/25	3.80%
12/31/25	3.64%
6/30/26	3.26%
12/31/26	3.81%
6/30/27	3.81%
12/31/27	3.82%
6/30/28	3.82%
12/31/28	3.83%
6/30/29	3.83%
12/31/29	3.83%

Following an economic slowdown in 2023 and 2024, Canadian output is expected to rebound in 2025 and 2026. Thereafter, real GDP growth is expected to decelerate to its long-run average of around 1.8% annually. Population growth is expected to decelerate in the coming years after its recent boom, boosting labour productivity growth.

Consumer spending will undergo a period of below-trend growth through 2026, as Canadian households save more in the face of high mortgage debt.
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.

After a period of high inflation, we expect headline and core consumer price inflation to stabilize around the 2% target over the medium term.

As a result, the Bank of Canada will be able to cut its policy rate back to the neutral rate of 2.25% by 2026. We expect the loonie to return to the 75 U.S. cent level once Canadian economic growth is able to catch-up to that of the U.S.

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Canada Interest Rate Forecast 2024-2028

Current Forecasts:

For more information about the 2024 Bank of Canada rate announcement schedule, read more here 👈

Key Takeaways (updated October 2024)

2024 Predictions (updated October 2024)

Will Interest Rates in Canada Go Down in 2024?

When is the next Bank of Canada rate increase and what can I expect?

How will the latest Bank of Canada interest rate announcement impact your monthly mortgage payments?

What is the interest rate forecast for 2024 in Canada? (updated October 2024)

What is CPI and how does it affect the Canada interest rate forecast?

What affects the Bank of Canada’s interest rate forecast?

What is the Canadian prime rate?

Is prime rate the same as mortgage rate?

What is the mortgage interest rate forecast for 2024 in Canada?

What are the interest rate predictions from the banks?

Alex Leduc

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