The 2024/2025 Rate Forecast

At the Mortgage Professionals Canada conference last month, Benjamin Tal, Deputy Chief Economist at CIBC World Markets, gave a very hopeful and informative presentation.

Mr. Tal always has a keen sense of what’s next both nationally and internationally. He is extremely apt at making sense of global economics, then breaking down in simple terms what it means for Canada. This time he came forward with a positive forecast that I agree with: rates are due to fall.

What’s behind Tal’s forecast

Tal predicts that rates will start to come down by late spring or early summer 2024 and continue to fall into 2025. He believes that they’ll come down by as much as 2.50% from today’s rate.

What makes him so sure? It’s fairly unanimous that Bank of Canada minister Tiff Macklem overcorrected with his rate hikes. He could have easily stopped raising rates at the end of 2022, but continued to raise it three more times to ensure skyrocketing inflation would cool down quickly.

It appears to have worked. Inflation has come down. Data from the U.S. is also encouraging, with their inflation rate down to 3.2% from 3.7%. We all know that when the U.S. sneezes, Canada gets a cold, so their data usually gives us a sneak peak at our data. Not to mention the Canadian GDP has been stagnant or negative the last few months, a strong indication that the economy is cooling and the tides are turning.

Bad news for the economy is good news for interest rates

When times are tough, rates don’t go up, they go down. And times are tough. Higher gas prices, higher grocery bills, higher mortgage costs, higher property taxes, higher minimum wages, and higher electricity rates (wait, wasn’t electricity supposed to be cheaper?) all contribute to an economy that’s hard to live with.

The carbon tax certainly hasn’t made things any better either. Not only has it not worked, but it’s only made life more difficult for the average Canadian. The government has to use whatever is in its arsenal to make life easier – that includes cancelling the carbon tax, but it also includes influencing the Bank of Canada to make the right moves with rates.

My advice

Take a 2 or 3 year fixed rate term if you’re renewing in the next year. Short term rates tend to be a little higher than your traditional 5-year fixed rate, but you’ll be able to take advantage of lower rates sooner. This will save you money in the long term. Of course, everyone is different, so if you’re ever unsure, don’t hesitate to pick up the phone and call me.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca