In 2023, Canadian mortgage holders faced challenges with a series of interest rate hikes by the Bank of Canada, impacting variable-rate borrowers and those renewing mortgages. While mortgage delinquency rates increased slightly, borrowers remained resilient. Looking ahead to 2024, about $251 billion in mortgages are set to renew, with an additional $352 billion in 2025. Despite expectations that 8 in 10 mortgage holders will experience significant payment increases by the end of 2025, anticipated interest rate cuts in 2024 are predicted to alleviate the payment shock.

Forecasts for the 2024 housing market vary among institutions. The Canadian Real Estate Association predicts a 9% year-over-year increase in home sales, with a 1.5% rise in average prices. Royal LePage expects a 5% year-over-year increase, emphasizing a significant shift as Canadians adjust to mid-single-digit borrowing costs. RBC Economics forecasts a 9.4% year-over-year increase in home resales, with a 1.9% rise in prices by Q4. TD Economics anticipates a 5.2% growth in home sales and a 0.5% increase in home prices.

Regarding interest rates, 2024 is anticipated to bring relief, with a potential Bank of Canada rate cut by mid-year, leading to forecasts of the overnight target rate falling to at least 4.00% by year-end. Most economists agree that the peak of bond yields, influencing fixed mortgage rates, has passed, with expectations of a decline. The Big 6 banks project varying year-end 2024 target rates, with BMO predicting 4.00%, CIBC at 3.50%, NBC at 3.25%, RBC at 4.00%, Scotia at 4.00%, and TD at 3.50%.

Published by Steve Huebl

https://www.canadianmortgagetrends.com/2023/12/2024-housing-market-and-interest-rate-forecasts/