Canadian mortgage renewals will weigh on economic growth: Deloitte

globalnews.ca:

A new forecast from Deloitte Canada calls for the pace of interest rate cuts to pick up in 2025, but not enough for many Canadian homeowners to avoid feeling the pinch of upcoming mortgage renewals.

Deloitte Canada released a new economic outlook on Wednesday that calls for overall real gross domestic product (GDP) growth of 1.2 per cent in 2024. That’s slightly higher than the 1.0 per cent growth called for in the consultancy’s previous forecast from April.

Chief economist Dawn Desjardins tells Global News the “stronger than anticipated” start to the year has lifted Deloitte’s forecast for 2024. But in turn, the firm is scaling back expectations in 2025, now calling for 2.6 per cent growth, down from 2.9 per cent previously.

That comes despite expectations for interest rates to drop more rapidly next year than in the remainder of 2024.

The Bank of Canada delivered its first interest rate cut in more than four years earlier this month, dropping its policy rate by a quarter of a percentage point to 4.75 per cent.

Deloitte’s forecast calls for another two rate cuts this year. But the firm expects the pace of cuts to pick up in 2025, bringing the Bank of Canada’s benchmark rate down to 2.75 per cent by year’s end.

That’s going to benefit Canadians who are renewing their mortgages next year, Desjardins explains, but it won’t be enough for most to avoid the pinch.

The Bank of Canada expects that around half of outstanding mortgages have renewed their terms already in the higher interest rate environment, with another half to go in the coming years.

Desjardins explains those yet to renew are largely the households who benefited the most from rock-bottom interest rates in the COVID-19 pandemic, a period that saw a flurry of