Many people are currently concerned about mortgage interest rate changes in 2024. As the economic situation continues to evolve, the impact these changes have on homebuyers and homeowners is crucial. Here are some tips regarding mortgage interest rate predictions that might be helpful for you.
- The bank’s mortgage interest rates are influenced by the Bank of Canada (BoC) Policy Rate. The BoC determines the Policy Rate based on various factors such as inflation, economic growth, the job market, exchange rates, and the global economy.
- Since the beginning of this year, the BoC has lowered the Policy Rate several times. As of November 1, 2024, the BoC Policy Rate is 3.75%, and most banks have a Prime Rate of 5.95%.
- It is predicted that the Prime Rate will drop to around 4.95% by the end of this year or early next year. This level of interest is likely to remain stable for the next 2-3 years, unless there is a significant change.
So, what kind of mortgage interest rate should you choose?
- If there is a high likelihood of interest rates decreasing or stabilizing, a variable rate mortgage might save you more money. However, if there is a higher chance that interest rates will rise, locking in a fixed rate could help you reduce future interest costs.
- Additionally, most banks offer the flexibility for customers with variable rates to switch to a fixed rate without a penalty. If you choose a variable rate now, you could switch to a fixed rate later if the interest rate decreases.
- However, if you want predictable cash flow each month, or if you believe the BoC will not lower the rate as much as expected, a fixed rate might be a better option for you.
There are many factors to consider when choosing your mortgage rate (such as the purpose of the property, potential plans to sell, penalties, each bank’s interest rates and policies, etc.), so it is highly recommended to consult with a mortgage expert before making your decision.
