Mortgage Payments in Canada: Movin’ On Up

The maple syrup-like stickiness in underlying inflationary pressures along with a rebound in the housing market pushed the Bank of Canada to raise rates again in July. A higher terminal rate and a somewhat slower pace of rate cuts in 2024 will translate into more pain for households at renewal. The most critical factor determining the payment shock for mortgages isn’t the path for interest rates, but rather the prevailing rate at renewal. The key takeaway then is that the Bank of Canada can alleviate much of the pain in 2025 and 2026 by cutting rates more than what’s currently being priced by markets.