Co-CEO makes eight predictions about real estate and mortgage outlook
Ratehub.ca’s co-chief executive officer James Laird has given eight predictions for the housing and mortgage markets in Canada for 2024, expecting slight changes in the new year and an improved outlook on the interest rate front.
The Bank of Canada is expected to keep its overnight rate at 5% in the first half of 2024, Laird said, and then could start cutting rates between 50 and 100 basis points for the remainder of the year.
The executive expects mortgage rates to decrease gradually throughout the year as bond yields decline alongside anticipated Bank of Canada rate cuts and may continue to fall.
That expected improvement on interest rates would mean a peak for the stress test for borrowers has already been reached. Currently, buyers looking to purchase a home must qualify at their offered rate plus two percentage points. However, borrowers should not expect mortgage rates to lower to have the stress test back at 5.25%.
Variable rates, which experienced a decline in popularity for the last 18 months due to rising rates, may regain favour in the new year, according to Laird, as the central bank begins a series of expected cuts.
Real estate prices, meanwhile, are forecasted to see modest growth, driven by lower rates and higher migration – although that could be hindered, Laird added, by the prospect of slow economic growth.
With 485,000 newcomers expected in 2024, immigration is expected to see the real estate market remain robust in the year ahead.
Meanwhile, there’s little prospect of a reduction in Canada Mortgage and Housing Corporation (CMHC) insurance premiums or an increase in the purchase price limit of $1 million despite promises made by the federal Liberals in 2021, Laird said.
Finally, the renewal of mortgages at considerably higher rates may put pressure on many households. However, the majority are anticipated to manage nonetheless, according to Laird. The number of defaults may rise, but they are expected to remain within the historical averages.
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