Interest rates in Canada could fall to 3.25% by the end of 2025.

Article content

Debt-ridden British Columbians can expect interest rates to fall by 1.5% over the next 18 months, according to Bloomberg Economics.

The financial market analyst released his interest rate estimates for central banks around the world on Sunday, noting that the Bank of Canada became the first of the Group of Seven central banks to cut its benchmark overnight interest rate.

Article content

The BoC made a move last month, cutting the rate from five percent to 4.75 percent. As of July 12, 2023, it was five percent.

The overnight reference rate is used by banks to set interest rates on household mortgages, commercial loans, lines of credit and credit card debt.

During the Covid-19 pandemic, central banks around the world have cut interest rates to previously unknown levels, which would derail the dreaded economic growth. Interest rates are used as a tool to help manage the economy. The logic is that if economic growth is weak, then cheap money borrowing encourages borrowing and spending.

If economic growth is too strong, as evidenced by rising inflation, then interest rate hikes can limit that growth.

In 2020, at the height of the pandemic, you could get a five-year fixed mortgage rate of less than two percent. Currently, homeowners pay about five percent for a five-year fixed-term mortgage.

RBC is offering a five-year fixed mortgage rate of 4.84%.

“(In Canada), strong domestic demand and indicators suggesting an imminent acceleration in spending mean the pace of interest rate cuts this year should be slow,” Bloomberg analyst Stuart Paul wrote.

Content of the article

“We expect the BoC to cut interest rates at a quarterly pace, raising the overnight rate to 4.25 percent at year-end. The potential for further declines in inflation is surprising with the risk of lowering the interest rate. “However, rapid rate cuts – amid population growth due to immigration – could reignite property prices and risk a secondary rise in inflation.”

The analyst predicted that there will be two more rate cuts in 2024 (in September and December), and the reference interest rate will be 3.25%. by the end of 2025

Bloomberg predicts that the only leading central bank in the world that will not cut interest rates in the next 18 months will be Japan, where the overnight rate is just 0.1%. due to economic stagnation.

The US Federal Reserve has set the interest rate at 5.5 percent, with forecasts calling for an increase of four percent by the end of 2025.

The next BoC interest rate announcement is due on July 24.

[email protected]

Bookmark our page and support our journalism: Don’t miss the news you need to know – add VancouverSun.com and TheProvince.com to your bookmarks and sign up for our newsletters here.

You can also support our journalism by becoming a digital subscriber: For just $14 a month you can get unlimited access to The Vancouver Sun, The Province, National Post and 13 other Canadian news sites. Support us by subscribing today: The Vancouver Sun | Province.

Share this article on your social network