Yahoo Finance ~ December 24th, 2024
With inflation back to the Bank of Canada’s two per cent target and rate cuts expected to continue through next year, Canadians should anticipate lower mortgage rates and better deals going into 2025, experts say.
Canadians have been facing higher interest rates over the last few years, after the Bank of Canada hiked its policy rate in the wake of soaring inflation. Since June, however, the central bank has cut its benchmark rate by 175 basis points over five consecutive decisions, including two jumbo 50 basis point cuts in October and December. The Bank’s policy rate now sits at 3.25 per cent. Economists expect that the Bank of Canada will continue to reduce interest rates next year, albeit at a “more gradual” pace.
2025 could be comeback year for the variable-rate mortgage
With interest rates on the way down, 2025 could see a further resurgence in interest for the variable-rate mortgage.
“We can safely expect that we’ll see some downward movement on the variable-rate side, whereas things are going to be a little bit stickier on the fixed-rate state,” Penelope Graham, mortgage rate expert at Ratehub.ca, said in an interview with Yahoo Finance Canada. Variable-rate mortgages move with the prime lending rate, which is affected by changes to the BoC’s policy rate. Fixed mortgage rates are affected by the bond market, which has seen yields remain “very, very sticky”, Graham notes. Since Oct. 1, yields for the benchmark 5-year bond have been in the range of 2.74 to 3.31 per cent.
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