0932 ET - The pending squeeze coming this year, and into early 2026, from mortgage renewals will compel the Bank of Canada to cut its policy rate well below market expectations, says economist Tiago Figueiredo of Desjardins Group. According to the firm's modeling, Figueiredo says the BOC policy rate will need to come down to 2% by early 2026 to keep a lid on mortgage arrears. Markets are currently pricing a terminal rate of 2.75%. Hundreds of billions of mortgages are up for renewal this year and next, at sharply higher rates relative to rock-bottom levels early in the pandemic. Figueiredo says that even if the BOC contains mortgage arrears, households "will still need to either save or spend significantly less" to cope with higher renewal rates. (paul.vieira@wsj.com, @paulvieira)
(END) Dow Jones Newswires
January 24, 2025 09:32 ET (14:32 GMT)
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