Bank of Canada Interest Rate Update - March 2024

The Bank of Canada (BoC) met for its second meeting of 2024 on March 6th, and made the decision to leave rates unchanged once again. Our economy is slowing with inflation continuing to ease, and it is very much anticipated that we are at the end of the rate hiking cycle. However, in the eyes of the BoC our inflationary data is still not coming down fast enough to warrant rate cuts yet.... even though 28% of our total CPI (a measure used to determine inflation) is made up by shelter costs, of which mortgage interest costs are a large component!! Economists have speculated that if we were to remove shelter costs from the calculation, inflation is already pretty much at the 2% target. In addition to that, shelter costs are also driven by rising rents which are directly linked to the dramatic increase we've seen in immigration over this past year. Keeping rates higher will not help this, we need housing supply to combat this issue.

The longer BoC leaves rates this high, the more damaging things will be for our economy, and the harder rates will need to fall when they eventually do. So, although we don't know exactly when it's going to happen, the next move is widely expected to be rate cuts.

With that said, if the BoC drops rates too soon it could also stimulate a housing market frenzy and eliminate any inflation progress we've made, so it isn't an easy balancing act for them to determine exactly when to pull the trigger. To avoid heating up an already strong spring market, the BoC will likely wait until June or July to make the first cut.

To read the official March 6th announcement, please click HERE

With rising mortgage delinquencies, a dramatic increase in business insolvencies and the overall weak state of our economy, it is anticipated that we should still see a 1.00% to potentially 1.50% reduction in interest rates by the end of this year. From there, rates are projected to ease by another 1.00% to 1.50% (depending on the state of our economy) by 2026. With all that being said, our economy still has a ways to go before we are out of these very challenging times. Especially with nearly 2.2 million mortgages that are up for renewal in 2024 and 2025, the payment shock to an already squeezed population will have an impact on all borrowers, and our economy as a whole. The consequences of the BoC not acting and reducing rates before this time will not be pleasant for anyone.

My top recommendation continues to be that we must ensure your financial house is in order so that you are better able to weather this storm, and I am here to help you through this. Please do not wait to reach out to me until it’s too late. If you have any high interest debt or are struggling with your payments, I am here to help. And if you have a mortgage that is coming up for renewal in 2024 or 2025, please reach out to me so that we can work together on a plan to ensure you are prepared.

What does this rate announcement mean for you?    

No changes

If you are in a "fixed payment - variable interest" product...    

And your payments have not yet changed, then you have likely hit or passed your "Trigger Rate", and you may be nearing your "Trigger Point". It is important that you understand the consequences of this, so please reach out to me so that I can explain your specific situation and my recommendations for what to do. You have great options in this product, until you don't, so please don't wait until it's too late to reach out.

Do not make any changes until we have talked. It is so important that you fully understand the implications of any changes that you make to your mortgage, and the branch staff is not trained to properly advise you on this. I am your trusted advisor, this is what I am here for and I am happy to help!

Should I lock-in my variable rate now?   

If locking-in to a fixed rate is something you are considering, let's talk. You may want to consider a short term fixed rate, which can offer you the fixed comfort today while still being able to renew at a time when rates are (hopefully) lower. 

I am personally going to continue to ride this out in my variable rate mortgages, as the current lock-in rates are too high for it to make sense for me. However, my budget can support the risk of staying variable, and the lock-in rates today don't work for my situation. With that said, many of our clients are seeing an opportunity to save right now if their variable rate is high enough, and especially for our clients who have other high interest debt with payments that are becoming unmanageable. If you have any concerns and are thinking of locking-in, please let me know and let's work together to brainstorm the right strategy for you. 

Some of our lowest fixed rate options available today:

• 1 year fixed @ 6.54%*

• 2 year fixed @ 5.94%*

• 3 year fixed @ 4.99%*

• 4 year fixed @ 4.99%*

• 5 year fixed @ 4.79%*

*Conditions apply

I believe there may be a time in the next 12-18 months where fixed rates are low enough that locking-in might make more sense. I will continue to monitor this for you, and will let you know when I think there may be opportunities.

I want to lock-in to a fixed rate, what do I do now?    

Contact your lender directly and ask them what rate they will offer you to lock-in. Request all terms available to you, including 2 or 3 year rates if possible. Once you have that information please send it to me and I will help you with a strategy. Do not make any changes until we have talked. It is so important that you fully understand the implications of any changes that you make to your mortgage, and the branch staff is not trained to properly advise you on this. I am your trusted advisor, this is what I am here for and I am happy to help!

Our team is here to support you every step of the way!