There has been a little relief for mortgage shoppers in recent days. Fixed-rates have come down slightly, led by declining yields for government bonds. Variable-rate mortgages appear to be maintaining their discounts and most market watchers believe the Bank of Canada has reached the top of this rate-hiking cycle.

The Bank, however, continues to warn that Canadians should be preparing for interest rates to remain higher for longer. Senior Deputy Governor Carolyn Rogers made that point again during a recent speech in Vancouver, saying it is important to adjust proactively to that possibility. Rogers cited a number of global considerations for higher rates including: China and other developing nations joining the worldwide economy; a decline in attractive investment opportunities for businesses; and an overall, international, adjustment to higher rates.

It is also useful to remember that central banks around the world have been working to normalize interest rates that have been at historic lows since the 2008 financial crisis.

Rogers offered some reassurance that Canadians are adjusting to higher rates. Household credit growth has dropped to its slowest pace since the early '90s. Delinquency rates on credit cards and other consumer loans are only slightly above pre-pandemic levels. Mortgage delinquencies are below pre-pandemic levels, and that is despite about 40% of all mortgage holders having already renewed at higher rates, with bigger payments.

As to when interest rates might actually start falling? The BoC's Q3 survey of "Market Participants'' suggests they are adjusting to the higher-for-longer scenario. Based on the median response they are expecting a quarter point drop in April, 2024. That is a month later than expectations expressed in the Bank’s Q2 survey.

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