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

The Canadian economy continues to show signs of weakness and recent inflation figures hovered at 1.7% last month, below the 2% target. Furthermore, unemployment reached a 3-year record high of 6.8%. This has prompted the Bank of Canada to cut rates further to avoid dragging the Canadian economy down further.

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.

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.

2024 Key Takeaways (updated December 2024)

The prime rate in Canada as of December 11, 2024 is 5.95%. (last change: -0.50% on December 11, 2024) On Wednesday, December 11, 2024, The Bank of Canada announced that it will be cutting its rate, bringing the policy rate to 3.25%. Recent data indicates inflation is decelerating toward the Bank of Canada's target, coupled with slow economic growth.

2024 Predictions (updated December 2024)

The Canadian economy continues to show signs of weakness and recent inflation figures hovered at 1.7% last month, below the 2% target. Furthermore, unemployment reached a 3-year record high of 6.8%. This has prompted the Bank of Canada to cut rates further to avoid dragging the Canadian economy down further

Will Interest Rates in Canada Go Down in 2024?

The Canadian economy continues to show signs of weakness and recent inflation figures hovered at 1.7% last month, below the 2% target. Furthermore, unemployment reached a 3-year record high of 6.8%. This has prompted the Bank of Canada to cut rates further to avoid dragging the Canadian economy down further

Canada Interest Rate Forecast 2025-2028

Q: 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.`

Last Updated: June 4, 2025

CURRENT INTEREST RATE FORECAST FOR 2024: 2.75% (last updated June 4, 2025)

Current Forecasts:

June 2025 Canada Mortgage Rate Forecast 📊

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

Key Takeaways (updated June 2025)

On Wednesday, June 4, 2025, The Bank of Canada announced that it will be holding its rate, keeping the policy rate at 2.75%.
Recent data indicates inflation is decelerating toward the Bank of Canada’s target, coupled with slow economic growth.

2025 Predictions (updated June 2025)

We’re seeing a consistent theme of “the Bank of Canada giveth and the Bank taketh” where spreads on variables continue to compress, reducing the net benefit of rate cuts to borrowers. Spreads of Prime-0.85% are weak compared to the Prime-1.40% spreads we saw back in 2020/2021.
Long-term rate expectations have reverted to levels we expected in December, with only two further cuts expected between now and the end of 2026. Those rate cuts are then expected to be unwound in 2027/2028, so the rates we see now are more or less what she should expect as the long-run normalized rates.

Will Interest Rates in Canada Go Down in 2025?

On June 4th, the Bank of Canada cut its interest rate to 2.75%. The next Bank of Canada announcement is scheduled for July 30, 2025.

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

While GDP growth has slowed, inflation expectations remain high, and unemployment has remained fairly stable. Tariff threats seem to be de-escalating and the Bank of Canada will hold to see how things continue to develop.

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

We're seeing a consistent theme of "the Bank of Canada giveth and the Bank taketh," where spreads on variables continue to compress, reducing the net benefit of rate cuts to borrowers. Spreads of Prime-0.85% are weak compared to the Prime-1.40% spreads we saw back in 2020/2021. Long-term rate expectations have reverted to levels we expected in December, with only 2 further cuts expected between now and the end of 2026. Those rate cuts are then expected to be unwound in 2027/2028, so the rates we see now are more or less what we should expect as the long-run normalized rates.

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 2025 is:

Variable Rate Interest Forecast 2025 to 2028 (as of June 2025)
Date	5-year variable rates
6/30/25	4.06%
12/31/25	3.94%
6/30/26	3.52%
12/31/26	3.89%
6/30/27	3.90%
12/31/27	3.93%
6/30/28	4.03%
12/31/28	4.08%
6/30/29	4.18%
12/31/29	4.24%

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): Your existing mortgage payments will remain unchanged. 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): Your payments will remain unchanged for now, but the outlook shows 0.5% in rate cuts are expected from the Bank of Canada throughout 2025-2026 which will slightly lower your mortgage payments.

What is the interest rate forecast for 2025 in Canada? (updated June 2025)

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

While GDP growth has slowed, inflation expectations remain high and unemployment has remained fairly stable. Tariff threats seem to be de-escalating and the Bank of Canada will hold to see how things continue to develop.

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.

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 seem to indicate they will hold.

Real GDP Growth: GDP growth in Q1 of 2025 slowed to 1.8%, below the Bank of Canada’s expectations relative to the January outlook. The Bank of Canada is expecting GDP growth of 0.8-1.6% in 2025 and -0.2-1.4% in 2026. This is below expectations and would support a cut. (Source: Bank of Canada)
Inflation: Core inflation (year over year) in April was 2.5% (vs 2.2% in March), above the Bank’s 2% inflation target and is trending upward, which would support a hold. (Source: Trading Economics)
Unemployment: Increased to 6.9% in April (0.7% higher than 1 year ago). On an absolute level, this is considered a reasonable amount of unemployment, and the generally flat trend in the past few months would justify a hold. (Source: Trading Economics)

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 2025 in Canada?

On June 4th, the Bank of Canada announced a rate hold, keeping the interest rate at 2.75%.

Our current best 5-year fixed rate is 3.89% and 5-year variable rate is 4.10%.

What are the interest rate predictions from the banks?

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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