Over the past two years, the Canadian economy has experienced significant fluctuations, particularly in areas closely connected to overnight interest rates. Between 2022 and 2023, the Bank of Canada (BoC) implemented an unprecedented 10 interest rate hikes. In the past, borrowers might have glossed over policy announcements. However, the landscape dramatically shifted as many saw their monthly payments rise sharply. As a result, borrowers now hang on to every word from the BoC regarding potential rate hikes or reductions.
On the positive side, the BoC made the decision to maintain the interest policy rate at 5% during October and November 2023. Clues of this decision were hinted at with the inflation data from September, unveiled around the mid of October.
Canadians now eagerly look forward to the December 6, 2023 announcement, when the bank is to hold its last meeting of the year. Interest rates affect not only borrowers but also the lending network, and many hope the BoC will take steps to help. An alarming trend of negative amortization has emerged, putting further pressure on the lending system for both borrowers and lenders. Despite all this, Canada's major banks have shared their predictions for the overnight interest rates for 2024 and 2025. Their forecasts provide some positive news in the uncertain economic times.
On the positive side, the BoC made the decision to maintain the interest policy rate at 5% during October and November 2023. Clues of this decision were hinted at with the inflation data from September, unveiled around the mid of October.
Canadians now eagerly look forward to the December 6, 2023 announcement, when the bank is to hold its last meeting of the year. Interest rates affect not only borrowers but also the lending network, and many hope the BoC will take steps to help. An alarming trend of negative amortization has emerged, putting further pressure on the lending system for both borrowers and lenders. Despite all this, Canada's major banks have shared their predictions for the overnight interest rates for 2024 and 2025. Their forecasts provide some positive news in the uncertain economic times.
IK Financial looked into data shared by some
Major Banks in Canada:
BMO anticipates that the overnight rate will begin its decline from 5.00% in the third quarter and is projected to reach 4.50% by the end of 2024.
Link to BMO Bank source: https://economics.bmo.com/en/recent-releases/
The screenshot below is as of October 2023.
Link to BMO Bank source: https://economics.bmo.com/en/recent-releases/
The screenshot below is as of October 2023.
CIBC offers a more optimistic forecast. Their predictions suggest a decrease in rates to around 3.5% by the end of 2024, potentially dropping further to 2.5% by the end of 2025.
Link to CIBC Bank source: https://economics.cibccm.com/cds?id=515e529c-704e-4e2a-bc9b-f47633329047&flag=E
The screenshot below is as of October 2023.
Link to CIBC Bank source: https://economics.cibccm.com/cds?id=515e529c-704e-4e2a-bc9b-f47633329047&flag=E
The screenshot below is as of October 2023.
Scotiabank predicts that the overnight rate for the Bank of Canada will start at 5.00% in the first quarter of 2024, decrease to 4.75% in the second quarter, drop further to 4.25% in the third quarter, and reach 3.75% by the fourth quarter.
Link to Scotiabank source: https://www.scotiabank.com/ca/en/about/economics.html
The screenshot below is as of October 2023.
Link to Scotiabank source: https://www.scotiabank.com/ca/en/about/economics.html
The screenshot below is as of October 2023.
TD Bank's forecast for the overnight target rate in Canada suggests it will be 5.00% at the beginning of 2024, declining to 3.50% by the end of 2024 and further dropping to 2.25% by the end of 2025.
Link to TD Bank source: https://economics.td.com/ca-forecast-tables#lt-ca
The screenshot below is as of October 2023.
Link to TD Bank source: https://economics.td.com/ca-forecast-tables#lt-ca
The screenshot below is as of October 2023.
Across lenders, there is widespread optimism, leading us to hope for a brighter future. However, it's essential to remember that while projections are positive, no one can predict the future with absolute accuracy. Thus, it's crucial to conduct your own research and not rely solely on any data you might encounter. The upcoming months will certainly play a key role in shaping Canada's financial landscape.
If you are looking for a mortgage, whether it's for a first-time purchase, investment purchase, renewal, or refinance, consider consulting with an experienced IK Financial mortgage agent.
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