In 2024, the mortgage markets in Canada and the U.S. are shaped by economic conditions, inflation, and central bank policies. Here’s a comprehensive comparison of key aspects you need to know.
Comparing Canadian and U.S. Mortgage Rates Forecast for 2024
Aspect | Canada | U.S. |
Current Interest Rate | 4.75% (as of June 5, 2024) | 5.25%-5.50% (as of June 12, 2024) |
Forecasted Rate | Gradually declining, expected around 4% by end of 2024, and 3.25% at end of 2025 | Expected around 5.1% by the end of 2024 and 3.9% at the end of 2025. |
Mortgage Types | Fixed-Rate (5-year terms), Variable-Rate, frequent renewals | Fixed-Rate (15 or 30-year terms), Adjustable-Rate (ARMs), refinancing common |
Housing Market Impact | High rates increasing payments, slow activity expected | High rates impacting homebuying, potential boost with rate cuts |
Economic Factors | Current inflation 2.9% (as of May 31, 2024). Inflation target 2% by 2025. | Current inflation 3.27% (as of May 31, 2024). Inflation target 2% by 2025. |
Current Interest Rates
Current Rate: 4.75% (as of June 5, 2024)
Trend: The Bank of Canada recently cut its policy interest rate from 5.0% to 4.75%, marking the first rate cut in two years due to declining inflation.
U.S. Mortgage Rates 2024
Current Rate: 5.25%-5.50% (as of June 12, 2024)
Trend: The Federal Reserve has maintained this rate following 11 rate hikes in 2022 and 2023.
Forecasted Trends
Mortgage Forecast 2024
Canada: Mortgage rates are expected to gradually decline through the second half of 2024, reaching around 4% by end of 2024 and 3.25% at the end of 2025, influenced by declining inflation and potential further rate cuts by the Bank of Canada.
U.S.: Experts predict the mortgage rate will fall to 5.1% range by the end of 2024, and potentially to reach 3.9% by the end of 2025, depending on inflation trends and economic conditions.
Mortgage Types
Fixed-Rate Mortgages Canada
Typically come with 5-year terms, with rates locked for the term.
Frequent renewals every 1-5 years.
Adjustable-Rate Mortgages U.S.
Commonly available in 15- or 30-year terms, with rates locked for the term.
Adjustable-Rate Mortgages (ARMs) feature an initial fixed rate followed by periodic adjustments.
Homeowners often refinance to take advantage of lower rates.
Housing Market Impact 2024
Canada
Current Trends: High interest rates have increased monthly mortgage payments, leading to slower market activity.
Future Outlook: Potential market boost if rates continue to drop.
U.S.
Current Trends: High rates have impacted homebuying, but expected rate cuts could boost the market.
Future Outlook: Home prices are anticipated to remain solid, with potential increases in home sales in regions with rising inventory.
Economic Factors Affecting Mortgage Rates
Canada
Inflation: The Bank of Canada is targeting a 2% inflation rate by 2025, with recent declines in inflation rates providing room for potential rate cuts.
Economic Growth: Canada’s real GDP growth was 1.1% in 2023 and is projected to be 1.4% in 2024. In Q3 2024, GDP was 0.7%, below forecasts, indicating a moderate economic outlook.
U.S.
Inflation: The Federal Reserve is focused on bringing inflation down to its 2% target, with recent favorable inflation readings boosting confidence in potential rate cuts.
Economic Growth: The U.S. real GDP growth was 2.5% in 2023 and is projected to be 2.1% in 2024. In Q3 2024, GDP was 0.5%, showing slower growth due to weaknesses in exports and inventories, aligning with the Fed's projections of a cooling economy.
This graph illustrates key aspects of current interest rates, forecasted rates, mortgage types, housing market impact, and economic factors for both Canada and the U.S
Summary
Both Canada and the U.S. are expected to see a gradual decline in mortgage rates through 2024, influenced by central bank policies aimed at controlling inflation and stabilizing economic growth. Homebuyers and homeowners should stay informed about interest rate trends and economic indicators to make well-informed mortgage decisions. The Canadian market may experience more frequent renewals and shorter-term adjustments, while the U.S. market could benefit from long-term fixed-rate stability and refinancing opportunities as rates decrease.
Sources:
The Ascent by The Motley Fool - For current Federal Reserve interest rates and detailed information: Federal Reserve Interest Rates.
Rates.ca - For comprehensive Canadian mortgage rate forecasts for 2024, including current interest rates, trends, and factors impacting the housing market: Rates.ca Mortgage Report.
Visual Capitalist: Mapped: GDP Growth Forecasts by Country in 2024
BDC.ca Canadian Economic Outlook for 2024: Shifting into Neutral.
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