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Last Updated: March 6, 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 March 2024)

  • The prime rate in Canada as of March 6, 2024 is 7.20%. (last change: +0.00% on March 6, 2024)
  • On Wednesday, March 6, 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 4.79% for 5-year fixed and 6.00% for 5-year variable.
  • January consumer price index, the measure for year-over-year inflation, came in at +2.9%, following December’s +3.4%, a result of the base-year effect since gasoline prices fell more every month in January 2023 than they did in January 2024.

2024 Predictions (updated March 2024)

  • For the month of March, Perch anticipates fixed rates will drop and variable rates will remain the same.
  • Expected cuts will begin in the second half of 2024 at a pace of roughly 0.25% per quarter into 2026. Cumulative rate cuts of 2% are still expected between mid-2024 and the end of 2026. Inflation has been stickier than expected in the last few months, which has tempered expectations of earlier rate cuts.

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:

Inflation continues to trend in the right direction and the Bank of Canada doesn’t feel the need to intervene with any rate changes to throw off that momentum.  The market is still expecting the first rate cuts in the second quarter of 2024.

March is essentially the mid-point between the last two quarters, which reflects expected cuts to begin in the second half of 2024 at a pace of roughly 0.25% per quarter into 2026. Cumulative rate cuts of 2% are still expected between mid-2024 and the end of 2026. Inflation has been stickier than expected in the last few months, which has tempered expectations of earlier rate cuts.

 
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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 March 2024)
Date 5-year variable rates

2/29/24

6.00%

6/30/24

5.96%

12/31/24

5.56%

6/30/25

5.07%

12/31/25

4.61%

6/30/26

4.47%

12/31/26

4.13%

6/30/27

4.18%

12/31/27

3.94%

6/30/28

4.17%

12/31/28

4.03%

6/30/29

4.34%

12/31/29

4.28%

 

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

Commentary from Ali Hussin, Head of Mortgage Advisory at Perch:

On March 6th, The Bank of Canada announced its decision to maintain the Policy interest rate at 5.00%. With 5 consecutive rate holds, markets and the Central Bank believe there’s clear evidence pointing to slowing demand and increased probability of a looming recession, led by slower consumption growth and a decline in housing activity, while still maintaining their hawkish and precautionary stance. 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. 

Commentary from Alex Leduc, Principal Mortgage Broker and CEO of Perch:

March is essentially the mid-point between the last two quarters, which reflects expected cuts to begin in the second half of 2024 at a pace of roughly 0.25% per quarter into 2026. Cumulative rate cuts of 2% are still expected between mid-2024 and the end of 2026. Inflation has been stickier than expected in the last few months, which has tempered expectations of earlier rate cuts.

 

 

How does inflation affect future Bank of Canada interest rate changes?

January consumer price index, the measure for year-over-year inflation, came in at +2.9%, following December’s +3.4%, a result of the base-year effect since gasoline prices fell more every month in January 2023 than they did in January 2024. Excluding gasoline, the headline CPI slowed year over year, from 3.5% in December to 3.2% in January. Canadians continued to battle elevated shelter costs (+6.2%) and mortgage interest costs (+27.4%) in January and beyond, notably, mortgage interest rates have been and continue 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 will need to move quickly, the next slated CPI announcement will be on March 19th.

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.

Canadian CPI Release Schedule 2023-2024

  • March 19, 2024 

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

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:
  • January consumer price index, the measure for year-over-year inflation, came in at +2.9%, following December’s +3.4%, a result of the base-year effect since gasoline prices fell more every month in January 2023 than they did in January 2024.
  • Canada’s continued increase in newcomers has been the biggest prop up to our job market, the unemployment rate was unchanged in December as it remained at 5.8%.
  • Canada added 37,000 jobs in January, following just 100 jobs in the final month of 2023, and while January’s report looks great for headlines, the underlying data shows a weaker job market.
  • 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

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

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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.

 

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.

 

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

On March 6th, the Bank of Canada announced a rate hold, keeping the interest rate at 5.00%.

Our current best 5-year fixed rate is 4.79% and 5-year variable rate is 6.00%.

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.

Expect cuts to begin in the second half of 2024 at a pace of roughly 0.25% per quarter into 2026. Cumulative rate cuts of 2% are still expected between mid-2024 and the end of 2026. Inflation has been stickier than expected in the last few months, which has tempered expectations of earlier rate cuts.

 

 

What are the interest rate predictions from the banks?

 

CIBC

CIBC economists say that “not much has changed over the past few months. Growth in the Canadian remains weak and inflation, as judged by the Bank’s preferred core measures, has showed some but not enough progress. We expect that to be the main message of the press conference will be to draw a line in the sand that we need to see further progress on the inflation before discussing rate cuts. There will likely be another token reference to the possibility of further monetary restraint, but that should be balanced by an acknowledgement of flexibility to get back to target and the outsized role of shelter costs. What we would like to see is the Bank putting greater weight on a broader set of inflation measures (cough …*CPIX*…cough) as a guidepost to monetary policy”.

RBC

RBC economists say that “The Bank of Canada is widely expected to hold the overnight rate steady at 5% in the first policy decision of 2024 – extending a pause that started following the last hike in July. The statement and press conference that follows will be watched closely for hints about how much longer the central bank expects to hold interest rates at these levels, although we expect the BoC to push back against the idea that a shift to interest rate cuts is coming soon. There is some potential that the central bank could hint at an earlier-than-expected end to quantitative tightening policy but would likely take pains to communicate the primary objective of that change would be to ensure adequate liquidity in funding markets rather than flagging a shift to easier monetary policy and imminent rate cuts”.

Scotiabank

Scotiabank economist, Derek Holt, predicted that there would be no policy change on January 24, 2024. He also predicts “no balance sheet changes are likely but there may be hints at how such changes are afoot. Expect less confidence in near-term progress on the inflation front and more pushback against nearer term easing”.

Holt continues to believe that “inflation risk is higher in Canada than the US and the BoC should take its time and be patient even as the Fed eventually begins cutting. Here’s the partial list: ripping wages with collective bargaining efforts cementing years of wage gains 2–3 times the BoC’s inflation rate and more inflation expectations that remain at or above the upper end of the BoC’s 1–3% target range; tumbling labour productivity; rampantly excessive immigration on a thoroughly mismanaged file that begs a pre–election cabinet shuffle; tight housing and auto inventories; ongoing fiscal stimulus that will very likely increase further at the federal and provincial levels of government; renewed global supply chain pressures as indicated by soaring shipping costs. Output gaps are one thing in terms of drivers of inflation, but the Governor applauds the move toward gradual balance and excess supply too loudly as the foundation for the BoC’s inflation forecasts”.

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. 
  • 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 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 to that of the U

BMO

According to BMO economists state that there is “no change expected in the overnight rate for the fourth consecutive meeting. There have also been some rumblings about potential changes to quantitative tightening (QT), but we aren’t expecting any shifts on that front just yet either (though there’s an outside chance of a tweak). While the market continues to get excited by the potential for rate cuts, it’s far too early for the BoC to take a more dovish tone. We’re anticipating that the statement will be broadly similar to what was said in December”. They have also stated that “there’s no denying there’s been progress on bringing inflation lower; however, it’s also clear that there’s still plenty of work to do in order to get back to 2%. Rate cuts are very likely in 2024, but the Bank of Canada is going to remain as patient as possible for inflation and inflation expectations to retreat further. Following three years of well-above-target inflation, the last thing policymakers want to do is ease policy too early and allow inflation to re-accelerate”.