Reflecting on 2023
A Year of Resilience and Growth
As we bid farewell to 2023, let’s reflect on Canada’s economic landscape, marked by robust job growth and increased investments in the early months. However, by year-end, the impact of high-interest rates led to a slowdown in business and consumer activities.
Anticipating Weaker Growth
Economists foresee weaker growth in the first half of 2024 due to the current high-interest rates. Despite this, there is optimism for a rebound in the latter part of the year.
Economic Landscape in 2023
The inflation rate in 2023 started at 5.9%, gradually decreasing to 3.1% by November. The Bank of Canada aims for comfort within the 3% – 2.5% range, and while inflation is not expected to reach its 2% target until late 2025, strategic rate adjustments have moderated the housing market without significantly affecting property values.
New Normal in Interest Rates
Canadians accepted the reality that rock-bottom interest rates are a thing of the past. While some modest decreases in rates are anticipated, the era of delaying entry into the housing market in hopes of further rate drops is fading.
2024 Economic Outlook
Effects of Rate Hikes Taking Root
Tangible effects of the Bank of Canada’s rate hikes are evident, coupled with the anticipation of inflation dropping below 3%. Rates are shifting, resulting in lowered fixed rates, especially 5-year rates, fostering competition among lenders.
Hope for Variable Rate and Adjustable Rate Holders
For variable rate and adjustable rate holders, economists predict a potential 100 – 150 bps rate cut in 2024. The Bank of Canada is expected to proceed cautiously, benefiting Adjustable Rate holders with reduced mortgage payments and Variable Rate holders seeing a shift towards principal repayment.
Focus on Housing Affordability
Amid housing affordability and supply shortages, there will be a continued push for new construction developments to bolster the housing supply, although this remains an ongoing challenge.
Implications for Consumers
Mortgage Renewals in 2024
Approximately $251 billion in mortgages are set for renewal in 2024, with another $352 billion in 2025. Consumers may face a significant increase in their monthly mortgage payments, emphasizing the importance of proactive management and seeking the best rates.
Opportunity for Refinancing
For those with high-interest debt, the declining rates present an opportune time to consider refinancing for debt consolidation, providing a chance to manage debt effectively.
Renewed Buyer Interest
As the anticipation of the end of interest rate hikes grows, buyer interest in the market is expected to reignite. Choosing variable or short-term fixed rates positions buyers to benefit from potential rate decreases in the near future.
Plan Ahead for 2024
While uncertainties persist, planning your mortgage renewal in 2024 requires a proactive approach. Together, we can navigate these currents and determine the best course of action that aligns with your family’s budget and needs.
We’re here to assist whenever you’re ready to embark on this journey. Let’s navigate the evolving landscape together.