Whether you’re planning to become a homeowner in the near future or preparing to renew your mortgage, you’re probably wondering how high interest rates will impact your mortgage. While it’s impossible to say with certainty how rates will change over the next few years, analyzing certain factors can still help you reduce your loan balance and make more informed decisions. A mortgage broker can offer guidance.  

Mortgage rate forecasts for Quebec and Canada

What are the rate forecasts for the year 2024?

According to the latest Bank of Canada Market Participants Survey, we could expect the first rate cut of the year as early as June 2024. This forecast, based on the median response from senior economists and strategists involved in Canadian financial markets, suggests that the key interest rate could be lowered to 4.75%, 0.25% below the current rate of 5%.

Opinions differ, however, as to how the Bank of Canada should address inflation, which is currently hovering around 2.9%, above the central bank’s target rate of 2%. There are several possible scenarios.

If inflation falls and the economy shows signs of recovery, the key interest rate could be gradually lowered to 3.5% by the end of 2024. This would stimulate the housing and real estate market and make home ownership more affordable. 

If inflation stays under control and remains in line with the central bank’s forecasts, mortgage rates are likely to fall gradually, contributing to a stable real estate market. In this case, industry experts forecast a key interest rate of 4% by the end of the year. 

On the other hand, should inflation persist, the Bank of Canada could choose to maintain its key interest rate. In this scenario, banks would likely follow suit, which would discourage spending and loan applications and encourage household savings. As for the real estate market, residential home sales could slow, and borrowers who took out mortgages at historically low rates in 2020 and 2021 may see their mortgage payments increase after renewal.

What should we expect in 2025 and beyond? 

According to the median response from the Market Participants Survey, rates should continue to fall gradually to around 3% by the end of 2025, due in particular to slowing inflation, which could drop to 2.1%. 

The outlook for 2026 remains unclear, however, as there is still much uncertainty about what direction inflation will take. If inflation continues to fall, rates could follow. 

Understanding the evolution of mortgage rates in Canada

What factors impact mortgage rates? 

The Bank of Canada’s primary role is to ensure the country’s economic stability. This is why inflation, which is driven by consumer spending, the housing market, employment, and immigration, is the most important factor that the central bank uses to determine its interest rates. To keep rising prices under control and maintain inflation at its 2% target, the Bank of Canada has to continually adjust its key interest rate. Canadian financial institutions use this rate as a benchmark when setting their own variable interest rates for loans. Fixed rates, on the other hand, are determined by bond yields and indirectly influenced by changes in the Bank of Canada rate.

Low interest rates make it cheaper for companies and individuals to borrow, which in turn encourages consumer spending and investment, thereby stimulating economic growth. 

Conversely, higher interest rates discourage people from applying for loans, thereby curbing consumer spending and investment. In theory, this will cause economic activity to slow and stabilize inflation at the Bank of Canada’s target rate of 2%.

Analysis of the current situation

While interest rates were kept low during the COVID-19 pandemic to stimulate the economy, they skyrocketed once the health crisis subsided, reaching 5% in July 2023. Since then, the Bank of Canada has maintained its key interest rate at 5% to curb runaway inflation. As a result, a large number of borrowers are already paying more toward their mortgages every month, a reality that will also be faced by those renewing their loans over the next two years.

Don’t hesitate to consult a mortgage broker for guidance! 

History of mortgage rates in Canada 

The Bank of Canada was created in 1935 as a private institution before being nationalized in 1938, during the Great Depression. Since then, in addition to playing a central role in the country’s economy, it has exerted a major influence on the real estate sector, since banks and lenders look to the central bank as a reference when setting their prime rates. 

1935: When the Bank of Canada was created, the key interest rate was set at 2.50%.

1945: Canada’s role in supplying the Allies during the war and the addition of more women to the workforce stimulated the economy, prompting the central bank to set its rate at 1.50%.

1955: Thanks to a 2% interest rate, justified by a high employment rate and high purchasing power, many Canadians were able to become homeowners.  

1970: From 1955 onwards, rates rose slowly but steadily to 7.75%. After several successive rate hikes, the key interest rate reached 21% in 1981, a record high partly attributable to the global oil crisis.

1990: After Canada’s economy slowly recovered from the recession of the 1980s, the key interest rate hovered around 12%. It remained on a downward trend until the Great Recession hit in 2008.

2008: The recession prompted the Bank of Canada to drop its rate to less than 1%, reaching a low of 0.5% in March 2009.

2019: While the economy recovered slightly in the early 2010s, falling oil prices kept rates below 1%. Despite economic growth, inflation remained low, forcing the central bank to maintain its rate at around 1.75%.   

2020: In response to the worldwide health crisis caused by COVID-19, the central bank had no choice but to quickly lower its key interest rate to 0.75% on March 13. Two weeks later, it lowered the rate further to 0.25%, where it remained for two years. 


According to financial market participants, a first rate cut could be announced as early as April. They forecast that the key interest rate could be lowered to 4.75%, 0.25% below the current rate of 5%. We could continue to see modest interest rate cuts if inflation reaches the Bank of Canada’s target rate of 2%.
The key interest rate is currently at 5%, where it has been held since July 12, 2023, to bring inflation back down to the bank’s target of 2%. 
Following the global COVID-19 pandemic, the Bank of Canada began raising rates in March 2022 to combat inflation. Since then, it has raised its key interest rate 10 times to reach 5%, a rate we haven’t seen since 2001.

Key points:

  • According to financial market participants, a first rate cut could be expected as early as April 2024, and rates should continue to fall gradually in 2025.
  • Inflation is the most important factor that the Bank of Canada uses to set interest rates. 
  • To keep inflation under control, the central bank has set its inflation target at 2%, a policy which requires continually adjusting its key interest rate. 
  • Established in 1935, the Bank of Canada not only plays a central role in the country’s economy, but also exerts a major influence on the real estate sector, since banks and lenders look to the central bank as a reference when setting their prime rates.