Are Mortgage Rates Finally Coming Down?

Are Mortgage Rates Finally Coming Down?


[Please note that we have not personally verified the text/graphic above, which may reference US data.  However, while the specifics may differ, the concept is still relevant.]

At a meeting on May 29, 2024, we attended a presentation from a Toronto mortgage broker (full PowerPoint here). While some details are specific to that market, most of the presentation was relevant to Canada overall.

Interestingly, at an office meeting recently, a colleague said that now reminded him of the early months of covid, when buyers were waiting to see what would happen.  Then the market took off and many buyers had to pay much more.

The document, “Mortgage & Economic Outline – May 2024,” by Outline Financial, covers the following key points:
  1. Bank of Canada Rate Projections: The Bank of Canada (BoC) had kept the overnight rate unchanged since July 2023, the highest in over 23 years (it dropped by 0.25% in early June, just after this presentation was prepared). Major banks forecast a rate drop of 0.75% to 1.00% by the end of 2024, with a more conservative market forecast of a 0.50% drop. For 2025, the forecast ranges from 2.75% to 3.5%.
  2. Bond Yields and Fixed Rate Movement: Bond yields, which influence fixed mortgage rates, have fluctuated due to economic activity. Yields dropped significantly in late 2023 and have varied since, with recent declines due to weaker economic news.
  3. Economic Data and Key Dates: Important dates include May 21st (CPI report), May 31st (GDP), June 5th (BoC rate announcement), June 7th (jobs report), and June 12th (US Fed rate announcement). These dates are crucial for understanding economic trends.
  4. Fixed vs. Variable Mortgage Comparison: Illustrative comparisons show the pros and cons of 3-year fixed and 5-year variable mortgage rates. Fixed rates offer predictable payments, while variable rates depend on BoC rate changes and may have lower penalties for breaking the contract.
  5. Toronto Housing Market Trends: April 2024 sales were down 5% compared to April 2023 and were the second-lowest in ten years. Active listings increased significantly from March to April 2024 by 44.7%, exceeding historical averages.
  6. Interest Rate and Housing Price Correlation: Historically, declines in interest rates have been followed by rising housing prices. The document includes data on the correlation between interest rates and average housing prices over 20 years.

The document also provides links to further resources and guides, including the 2024 Federal Budget Quick Reference Guide and a guide to co-buying and co-owning properties.

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