Canada Interest Rate Forecast (And How It Affects Toronto Real Estate!)

Knowing what’s going on with Canada’s interest rates is crucial for Toronto real estate investors.

The current interest rate directly affects how big of a mortgage you can borrow and how you manage your monthly cash flow.

It’s also important to keep an eye on Canada interest rate forecasts, since these trends directly impact where Toronto real estate might be headed, and this can make a big difference in your long-term return real estate investment potential.

Let’s break it down!

Bank of Canada's Policy Interest Rate: History & Forecast

Current Bank of Canada Policy Rate: 5.00%

Source: Elevate Realty, Bank of Canada, TD, CIBC, BMO, RBC, Scotia. Last updated: April 26, 2024.

Bank of Canada's Policy Interest Rate Forecast By Major Bank

Source: Elevate Realty, Bank of Canada, TD, CIBC, BMO, RBC, Scotia. Last updated: April 26, 2024.

Canada Mortgage Rates

How is the Canada 3 year bond yield related to Canada's policy interest rate?

When investors buy Canadian bonds, they’re essentially locking in an interest rate for the future. 

So, if they expect Bank of Canada to raise the Canada policy interest rates in the future, they might demand higher yields on bonds to compensate for the potential increase in rates. Conversely, if they expect Canada policy interest rates to fall, they might accept lower bond yields.

What is a fixed mortgage rate?

A fixed mortgage rate is a set interest rate that remains constant throughout the term of the mortgage loan. With a fixed rate, your monthly mortgage payments stay the same, providing stability and predictability over time. 

It’s like locking in your rate to shield yourself from fluctuations in the market, giving you peace of mind knowing exactly what you’ll owe each month.

What is a Prime rate?

The prime interest rate is a rate set by a bank and serves as a benchmark for interest rates on various loans and financial products.

Banks typically set their prime rates based on the central bank’s policy rate and other factors, like prevailing market conditions and their own cost of funds.

What is a Variable Mortgage rate?

A variable mortgage rate can change over time based on the prime rate, potentially affecting your monthly payments. 

While variable rates offer flexibility and potential savings, they also come with the risk of increased payments if rates rise.

What is a HELOC rate?

A HELOC allows you to borrow against the equity in your home as needed, similar to a credit card. The interest rate on a HELOC is variable, based on the prime rate. 

HELOC rates are typically lower than other forms of credit, making them a popular option for accessing funds for home improvements, debt consolidation, or other expenses.

A Closer Look At Canada's Interest Rate Forecast

Source: CNBC. Last updated: April 26, 2024.

Canada’s fixed mortgage rates have been up and down lately, but honestly, they’ve been just hovering around the same rates since January.

The reason fixed rates have been fluctuating is because the market lacks solid data on inflation. Without clear information, it’s hard to pin down when and by how much Canada policy interest rates will drop this year.

How Do Canada Interest Rates Impact The Toronto Real Estate Market?

When Canada’s fixed interest rates dropped sharply at the end of last year, it was clear that Toronto real estate prices would go up with affordability improving. 

But now that fixed interest rates have stayed the same for months, we expect Toronto prices to level out too. And since rents usually follow fixed rate trends, Toronto rents will likely start to level off too after a steady decline since the end of 2023.

To sum it up, the Toronto real estate market is getting more stable. You won’t get rich quick, but the risk of Toronto real estate prices dropping has gone down a lot.

Here's How A Top Investment Property In Toronto Looks Like Today

At a purchase price of $1 million, with $50,000 invested in renovations, you could potentially generate slightly positive cash flow split into 3 units. Plus, with each mortgage payment, you’ll be building equity, and there’s a good chance of sustainable appreciation over time. 

This combination sets the stage for great returns on investment and long-term success with a multi-unit Toronto investment property!

Actual returns may vary depending on assumptions.  Read our definitions and assumptions.

What Toronto Real Estate Investment Is Right For You?​​

Check out our complete Toronto real estate investment guide for all the details and real-life examples. If you’re ready to dive in, just book a call with us!