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The Bank of Canada announced on December 6 that they will hold interest rates steady for the time being. The current overnight rate remains at 5.00%.

We predicted that the Bank of Canada would hold rates steady in our interest rate forecast as a result of slowing inflation and a weakening economy.

The current overnight rate remains at 5.00%.

Key Takeaways

How will the latest Bank of Canada interest rate announcement impact the mortgage market

The latest Bank of Canada interest rate announcement occurred on December 6. The Bank of Canada announced they were going to hold rates steady in December following reports of slowing inflation and a stagnating economy. Inflation continues to move towards the Bank of Canada’s target and the economy has ground to a halt, so the current conclusion is that enough has been done.

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

As a result of recent data showing inflation continuing its deceleration towards the Bank of Canada’s target and slow economic growth, the market now predicts no further rate hikes. Instead, it anticipates that rate cuts will likely start in the second half of 2024. While the pace of rate cuts is largely unchanged at approximately 0.25% per quarter over 1.5 years, the long-term normal interest rate has decreased by 0.50% compared to October’s outlook.

Various sources estimate that 60% of mortgages are set to renew by 2026. Good news for borrowers: Anticipated rate reductions of about 1% in 2025 and 1.5% in 2026 will help ease the impact of higher rates during renewal.

In the chart below, you can see how our 5-year variable rate forecast has changed over time based on the Bank of Canada interest rate announcements. (Like what you see? Sign up to get free, personalized mortgage insights and our monthly mortgage outlook!)

The current focus for the Bank of Canada remains bringing inflation back in line with the targeted 2%. The Bank of Canada is anticipated to begin cutting rates in late 2024  into 2025. During the next few years adjustable rate mortgage holders are likely to see lower payments.

Related: Why are variable rates higher than fixed rates?

Buying now gives you the opportunity to lock in a lower purchase price in today’s market, benefitting you in the long run. Think of it this way: You date the mortgage payment, but you marry the purchase price.

In other words, your mortgage payment can fluctuate as you change terms, but your purchase price remains the same.

We increasingly see new buyers opting for a shorter mortgage term with a higher amortization to minimize their monthly payments. This enables them to potentially renew at a lower rate a few years from now, and in the long run, accelerate their amortization to pay off their mortgage earlier.

How will the latest Bank of Canada interest rate announcement affect home prices?

National sales activity edged down further in October by 5.6% month over month, remaining on trend with August’s and September’s declining sales activity. Canada’s inventory edged down by 2.3% month over month in October, the first decline we’ve seen since March. Sales activity has officially tapered off and inventory is now on a seasonal decline, thus the sales-to-new listings ratio eased to 49.5% in October, a 10-year low, in comparison, this ratio peaked at 67.9% in April.

“We know housing demand is extremely high all across the country, but October’s resale data was further confirmation that it probably won’t be manifesting itself in the existing home market for the remainder of this year and likely not until spring 2024 at the earliest,” said Shaun Cathcart, CREA’s Senior Economist.

The Aggregate Composite MLS Home Price Index edged down by 0.8% on a month-over-month basis in October, however it is up 1.1% year-over-year. We’re now heading towards the expected drop in home prices as both higher interest rates continue to apply downward pressure on pricing across Canada. The actual (not seasonally adjusted) national average home price was $656,625 in September, up 1.8% year over year.

Where will mortgage rates be in 2024?

According to financial models by Alex Leduc, Principal Broker at Perch, 5-year variable mortgage rates should start dropping in late 2024.

Will mortgage rates go up in the next 5 years?

Based on our latest Mortgage Rate Outlook, expect 5-year variable mortgage rates to start dropping in 2024 and continue doing so into 2025. We’ll be updating our mortgage rate forecast after every Bank of Canada interest rate announcement – you can subscribe to our mortgage rate forecast for free.

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What is the Bank of Canada interest rate today?

The current Bank of Canada interest rate sits at 5.00%, with a 0.25% rate hike announced on July 12, 2023.

When is the next Bank of Canada interest rate announcement?

The next scheduled Bank of Canada interest rate announcement is Wednesday, January 24, 2024 at 10:00 AM ET.

What are the interest rate announcement dates in 2024?

There are a total of 8 Bank of Canada interest rate announcements each year. The dates for 2024 are as follows:

  • Wednesday, January 24, 2024
  • Wednesday, March 6, 2024
  • Wednesday, April 10, 2024
  • Wednesday, June 5, 2024
  • Wednesday, July 24, 2024
  • Wednesday, September 4, 2024
  • Wednesday, October 23, 2024
  • Wednesday, December 11, 2024

(Source: Bank of Canada)

The Bank of Canada typically makes their interest announcement at 10:00 AM Eastern Time.

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