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2024 Mortgage Rates: Canada vs. U.S. - What Homebuyers Need to Know

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:

  1. The Ascent by The Motley Fool - For current Federal Reserve interest rates and detailed information: Federal Reserve Interest Rates.

  2. 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.

  3. Visual Capitalist: Mapped: GDP Growth Forecasts by Country in 2024

  4. BDC.ca Canadian Economic Outlook for 2024: Shifting into Neutral.

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