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2024 Interest Rate Predictions: What Real Estate Consumers Need to Know

General Satinder Grewal 9 Jan

The year 2024 is gearing up to be an exciting one, especially for those in the real estate market. According to a recent article by Ted Rechtshaffen in the Financial Post, the headline boldly declares, “Interest rate cuts will be the story of 2024.” In this simplified version, we’ll break down the key highlights and implications of this prediction for real estate consumers.

Key Highlights:

  1. Interest Rate Movement in 2023:
    • In 2023, the Bank of Canada’s overnight interest rate began at 4.25% and ended the year at 5%, marking a 0.75% increase following a 4% increase in 2022.
  2. Predictions for 2024:
    • Experts like Ted Rechtshaffen and Benjamin Tal of CIBC predict a 2% decline in interest rates by the end of 2024, bringing the overnight rate back to 3%.
    • Detailed predictions for 2024 rate changes:
      • No change on January 24 and March 6
      • A 25-basis-point drop on April 10 
      • A 50 bps drops on June 5 and July 24
      • A 25 bps drops on September 4, October 23, and December 11
  3. Factors Influencing Predictions:
    • These forecasts are based on negative Canadian economic trends, international central bank actions, and historical Bank of Canada rate patterns.
    • Less volatility is expected in the five-year Canadian bond yield compared to 2023.
    • Anticipated declines in mortgage rates by the end of 2024, including variable rates dropping by 2.3%, three-year fixed rates by 1.1%, and five-year fixed rates by 1.2%.

Investment Implications:

  1. Sector Outlook:
    • Bonds, REITs (Real Estate Investment Trusts), utilities, and financials faced pressure in 2023 but are expected to rebound in 2024.
    • The article provides specific stock and bond recommendations for potential strength and recovery in 2024.
    • Middle-range corporate bonds are highlighted as offering the best risk/reward returns.
  2. Investment Opportunities:
    • Investors are advised to consider high-yielding structured notes and Canadian bank limited recourse capital notes, as yields on these special investments may not last long.
    • The investment landscape is shifting in response to falling overnight rates in 2024, potentially creating winners in various sectors.

Real Estate Implications:

  1. Real Estate Market:
    • The article suggests that the real estate market may experience increased activity in the second half of 2024.
    • Many Canadians may turn to mortgage brokers for expert advice as they navigate these changing economic conditions.

In conclusion, the anticipated interest rate cuts in 2024 could have significant implications for various sectors, including real estate. Real estate consumers should keep an eye on these developments and consider seeking guidance from experts in the field as they make decisions in this evolving economic landscape.

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