On everybody’s mind as we kick-off the New Year!

As we begin the new year, there's a lot of discussion about the economic outlook for 2024, especially regarding inflation and interest rates, which are critical for understanding the current financial environment. This is particularly important for those dealing with mortgages.

This year, we're seeing promising news with a significant decrease in inflation. Experts are optimistic as the Consumer Price Index is expected to return to the Bank of Canada's target of 2%. This is a major improvement from the 5.9% seen at the beginning of 2023, dropping to below 3% by the end of the year. The Bank of Canada's strategy, which included increasing the key interest rate, seems to have been effective in controlling inflation, although the last increase might have been a bit excessive.

However, not all aspects of the economy are experiencing relief. Housing and food prices are still high, and these areas are not easily controlled by monetary policy alone. This might necessitate other measures, such as adjusting immigration policies to help balance the supply and demand in the housing market.

Looking ahead, economists predict a reduction in the Bank of Canada's key interest rate by the end of 2024, possibly by 100 to 150 basis points, announced in two or three stages. This approach differs from the U.S. Federal Reserve, which has been more open about its plans for three rate cuts in 2024. Even with these potential cuts, the key rate would remain at a high 3.5%. It's important to remember that the full impact of monetary policy changes can take time to be felt in the economy.

There's also been talk of a recession, especially in Quebec, where the economy might have shrunk for two consecutive quarters, which technically defines a recession. The anticipated drop in interest rates should provide some relief, particularly to the real estate market, which is expected to remain quiet until the spring or summer. The market might see some activity with a decrease in interest rates.

For those with mortgages, this economic climate can be challenging. About 40% of mortgage holders have already renewed their loans at higher rates. If you're facing a renewal or have concerns about your mortgage, it's a good idea to seek professional advice.

In summary, as we move through 2024, staying informed and consulting with experts is key, especially in the realm of mortgages. At Fred and Martin Mortgages, we're dedicated to helping you understand these changes and find the best way forward. Whether you're renewing your mortgage, thinking about a new purchase, or just need advice on your current situation, we're here to provide expert guidance. In these changing times, don't hesitate to reach out to Fred and Martin Mortgages for support in navigating the mortgage landscape.

Fred and Martin