Key points:
- The Federal Reserve of the United States of America has a large impact on how interest rates move in Canada.
- Fixed-rate mortgages in Canada are set to drop, which will likely affect the housing market in 2024.
Fixed-rate mortgages are set to drop
This video discusses how the Federal Reserve of the United States of America impacts interest rates here in Canada. Here’s why decisions in the U.S. will contribute to lower fixed rates in Canada in 2024.
Don’t feel like watching? Find the full transcript below!
Chris: [00:00:00] Nothing moves Canadian mortgage interest rates quite like the Federal Reserve of the United States of America. You would think that the Canadian bond market would care about what happens domestically, or what the Bank of Canada had to say, but have the Federal Reserve in the United States suggest that three rate cuts were in store for 2024, and we can all of a sudden move mountains.
Chris: [00:00:26] On Wednesday, after the Federal Reserve’s announcement, we saw a miraculous 25 basis point drop to the five year bond yield. And what does that actually mean practically? For mortgages, it means that fixed rate mortgages, specifically the five year will drop. We should see almost all five year fixed rates below 6%. And some of the high ratio options, the insured options probably now reaching comfortably into the high fours. And we expect this trend to continue throughout 2024. At the moment, the market is pricing in the expectation of a 1.5% drop to the prime rate by next Christmas.
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Chris: [00:01:10] So all of this bodes well. And the question that remains is whether these signals will be strong enough for buyers to return to the real estate market and pick up some of that inventory that has been accumulating and sitting there driving prices lower. And this is a story for 2024. You’re going to want to tune in and pay attention.
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