There’s been a lot of chatter in the financial world lately about potential interest rate cuts from the Bank of Canada, and recent surveys of economists and analysts is aiming to shed light on what’s coming next. According to the latest quarterly Market Participants Survey, a majority of financial experts surveyed expect the Bank of Canada to lower its policy rate by two more quarter-point cuts, bringing the rate to 2.50% by July 2025.
What Does This Mean for You?
For homeowners and potential buyers, this forecast is significant. Lower interest rates can help ease the financial burden for those carrying debt, and for those looking to enter the housing market, this may make mortgage rates more affordable. However, it’s important to understand how the rate cuts will play out and how they might impact the broader economic outlook.
The Bank of Canada’s Likely Moves
Most of the 28 market participants polled in the survey predict that after the two quarter-point cuts, the Bank of Canada will hold steady at the 2.50% policy rate until at least the first quarter of 2027. This more cautious outlook contrasts with the slightly more optimistic predictions from some of the Big 6 banks, which expect rates to fall to 2.75% by March 2025, with some even forecasting rates as low as 2.00% by the end of the year.
What does this mean? Essentially, we’re looking at a period of relatively stable but lower rates in the near future. For those planning to buy a home or refinance, it may be an excellent opportunity to lock in a competitive rate before things shift again.
Economic Growth and Recession Risks
While lower rates generally encourage borrowing and spending, the economic environment remains full of uncertainties. According to the survey, the Canadian economy is expected to grow at a modest 1.8% by the end of 2025, with a slight increase to 1.9% by 2026. The strongest upside risk is a more robust housing market, with a large majority of respondents indicating this could boost the economy.
However, there’s also a real possibility of recession. The probability of a recession occurring in the next 6 to 12 months is estimated at 25% to 30%. If we enter a recession, it could lead to job losses and higher financial strain on Canadian households, which could ultimately dampen housing demand despite lower interest rates.
Inflation and Housing Market Impact
As for inflation, most experts expect it to stabilize at around 2.0% over the next few years, which is within the Bank of Canada’s target range. But housing market activity remains a key risk factor. The real estate market has the potential to either boost or slow the economy, depending on how the next few months unfold. If the housing market sees a resurgence, it could contribute positively to economic growth, but if the market stagnates or sees a decline, it could weigh heavily on Canada's overall economic outlook.
What Should You Do Now?
With these potential rate cuts and economic factors in play, it’s a good time for homebuyers to stay informed and plan accordingly. Whether you’re looking to purchase a home or refinance your mortgage, understanding how these changes may affect your financial situation is key. Lower rates may make mortgages more affordable, but you’ll also want to consider your long-term financial goals, especially in light of potential economic uncertainties.
If you’re considering buying a home or refinancing, I’m here to help you navigate these developments and find the best strategy for your needs. Let’s talk about how you can take advantage of the current environment while staying mindful of what might come next.
Melissa Kuczepa, AMPC, Mortgage Agent Level 2
(905) 925-4762
Mortgage Architects #12728
Comments