Bank of Canada to reduce interest rates to 2.25 percent in 2025

Asma Ahmed - | World

The Bank of Canada is predicted to implement a significant interest rate reduction to 2.25% by 2025, according to a recent projection by TD.

Anticipated Interest Rate Cut by the Bank of Canada in 2025

The long-term outlook, crafted by James Orlando, TD CFA, and director Thomas Feltmate, anticipates a mitigation of inflationary pressures in the medium term. This easing of inflationary concerns could pave the way for the central bank to lower interest rates to the projected neutral rate of 2.25%.

Potential Relief for Borrowers

The speculated reduction would mark a notable decrease from the current interest rate of 5%. Such a move could bring relief to borrowers grappling with high mortgage payments, providing a more favorable financial landscape for many.

Impact on the Housing Market

In recent months, prospective homebuyers have faced challenges in securing mortgages, either due to eligibility constraints or a strategic decision to postpone until interest rates become more favorable. This trend has contributed to a decline in home sales figures across major markets nationwide.

Concerns of Mortgage Holders

The burden is particularly felt by existing mortgage holders, as indicated by a recent study from Zulu, which revealed that almost half of Canadian mortgage holders express apprehension about renewing their mortgages at potentially elevated rates.

Widespread Financial Impact

Another TD report, released earlier this month, highlighted that by the conclusion of 2023, nearly 50% of all mortgage holders are expected to witness an increase in their monthly payments compared to February 2022, the month preceding the Bank of Canada's initiation of a rate hike campaign. This percentage is projected to rise further to 65% by the conclusion of 2024.

As the Canadian financial landscape evolves, these forecasts shed light on the potential trajectory of interest rates and their far-reaching implications for borrowers and the housing market.

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Asma Ahmed
Asma Ahmed
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