CIBC’s Rate Forecast & Incoming Immigration Will Play A Big Part In Toronto’s Future Real Estate Market

CIBC Bank recently released the following forecasted rates in the chart below. Although these figures are simply estimates, many in the financial and lending world agree that 4.5% will become the new normal key interest rate and that we likely won’t see a reduction in rates until mid to late 2024. We are unlikely to see the return of the historically low rates that we have become accustomed to over the recent years which will most definitely play a big part in Toronto’s future real estate market moving forward.

CIBC's rate forecast

In addition to a higher key interest rate, Canada plans to admit 1.45M new immigrants over the next couple of years. Many of these new immigrants will be coming as “homebuyers” with funds to purchase a property. This large increase in population will very likely fuel an increase in the average sale price once rates have dropped in 2024. Until then it’s unlikely that we will see a drastic increase in the average sale price. Below is a chart showing Canada’s immigration trends between 2000-2022. As you can clearly see, there was a substantial growth in immigration between 2021-2022 with even more substantial growth coming over the next couple years.

Canadian Immigration Chart

With Bank of Canada’s recent announcement to stick with 4.5% as the key interest rate, many lenders are seeing an increase in buyers applying for mortgages but not as many deals taking place or closing when compared to before the rate hikes took place. Many borrowers are now borrowing money from family or using co-signers to secure their mortgages due to the limitations that the higher rates, limited household income and stress test imposes on them. The average household income in Toronto and the GTA is struggling to keep up with the higher key interest rate, growing demand for available homes and restrictions imposed by the stress test.

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