This reality will come, they say, despite signs the Bank of Canada’s perpetual interest rate hikes may be winding down, with itsInterest Rate Forecast Report
As the report outlines, however, even with this pause in climbing rates, compared to a decade of historically low rates, the impact of the BoC’s elevated overnight rate will continue to put pressure on heavily indebted Canadians. Some may face insolvencies due to the inability to carry large loans — including mortgages.
Tony Stillo, Director of Canada Economics echoes her thoughts on this hard-hitting reality. “The Canadian economy is very sensitive to interest rates because of elevated household debt and overvalued housing, and is likely already in the early stages of an emerging recession,” says Stillo. It’s not until October 2023 that 13% of Finder experts believe the BoC will start to reduce overnight rates, prompting reductions in interest rates, across the country. Stillo anticipates the BoC to hold steady in 2023, with rate reductions coming in 2024. He also suggests that the BoC will not consider a rate increase unless there is overwhelming economic evidence of a heated economy.
“The biggest interest rate increases occurred in mid-2022. If it takes around 18 months for these interest rate increases to have maximum impact, then the effect of those moves should occur in late 2023,” says Moshe Lander, Senior Economics Lecturer at Concordia University. “If inflation rates come down around 0.25% per month, then inflation will hit the upper band of the Bank’s target range in early 2024.
Angelo Melino, professor at the University of Toronto, expects to see unemployment at 6% by year end due to “a slowdown in economic growth that will reduce the demand for labour.” Meanwhile, Lars Osberg, McCulloch Professor of Economics for Dalhousie University, sees a more aggressive increase to 6.5% by year end citing, “slowing construction and consumer spending.”That brings us to the real estate market. Nearly all experts — 88% — predicted a decline in real estate prices in 2023.