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Interest rates have likely peaked

Bank of Canada building
Bank of Canada interest rate decision

This morning, January 24th, the Bank of Canada (BoC) announced that it will maintain the interest rate at 5.0%, marking the fourth announcement with no change since the last increase in July 2023. However, the BoC removed all the language referring to possible future rate increases. That means today's rate is likely to be the peak for some time. The next BoC meeting will be held on March 6th 2024.

Inflation is now at 3.4% and economic growth is now at negative 1.1% . The BoC's target for inflation is 2.0% with a range of 1 to 3%. So we are almost there. The economy is no longer in excess demand, so it is just a question of time before inflation goes back to normal, but it is proving to be sticky. The largest component that is not moving is mortgage cost and rent which are not trending downward.  Now the big question is when will rates be cut. The bond market is pricing cuts in the second to third quarter of 2023 (April to September). The bond market is back at the level from May 2023. It is therefore possible that the BdC will cut rates by at least 0.5% before the end of 2024. Many economists are predicting up to 1.5% cut this year. We are now seeing the fixed rate drop from its peak. As of today, the best rate advertised is 4.95% for a 5-year fixed insured rate. I expect the rates to continue a slow downward trend for the coming months when banks become more aggressive for the spring market.   

For current mortgage holders and mortgage seekers

This is great mortgage news, there has been no change. This is also good news for incoming renewal. Yes, there will still be a payment chock because most people will see at least a doubling of their interest rates, but this is better than the 3x of last fall. There are solutions to avoid your payment to go up 40%+ at renewal, but every customer is different, so every case will have to be looked at individually. If you have a renewal in the next 4 months, please contact me sooner than later. 

If you are pre-approved, it is more likely that you have a fixed rate instead of a variable rate, so you may qualify for a little more than you were. If you are still searching for a property, please contact me for an update. For those considering purchasing, I suggest getting pre-approved now. With fixed rate trending lower. We might get a repeat of last spring, when the rate hit in the mid 4%, the inventory (number of property for sale) dried up quickly and bidding wars became normal. The short-term effect on property values is likely a price stabilization or if rates continue to go down, prices might start creeping up again. I don't expect a significant price movement for now, but the real estate spring season may come early.

To make an appointment with me for a pre-approval:

To make an appointment for a followup or for another topic (Renewal, refinance):


Simon Bilodeau

Mortgage Broker

DLC-Mortgage Negotiators


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