6 financial trend forecasts for 2025

Inflation has forced many Canadians to tighten their purse strings, which means spending less as well as spending smarter. The Bank of Canada (BoC) quarterly survey of consumer expectations found that fewer consumers anticipate increasing their spending on discretionary items, such as restaurant meals, entertainment and vacations.

In addition, nearly half of consumers continue to expect a recession in the coming year — a reasonable sentiment considering the year’s lacklustre economy, rise in unemployment, and concerns over the impact of US economic and trade policies under a second Trump presidency. 

Ratehub.ca’s own consumer survey also found that consumers are seeking out deals and cheaper alternatives when shopping, cutting back on non-essential spending, and actively comparing financial products.

The Bank of Canada has been cutting rates since June 2024 in its attempt to temper inflation and stimulate the economy that has all but stalled. The Overnight Lending Rate has since come down by 175 basis points, and while rates remain higher than pre-pandemic levels, the overall risk of mortgage defaults is now less perilous.

“CPI inflation has been about 2% since the summer, and we expect it to be close to target, on average, over the next couple of years. We thought elevated shelter price inflation would continue to ease, and it has,” said Tim Macklem, Governor of the Bank of Canada, in a press conference.

Despite a slight uptick in November, the real estate market remains slow, as financial experts predict further rate cuts from the BoC in 2025. Shoppers are also seeing volatile bond yields — which affect fixed-rate mortgage rates — so it makes sense to take a wait-and-see approach.

• Also read: Ratehub.ca’s 2025 mortgage predictions

The high costs of living and borrowing in the past few years are taking their toll on Canadians: according to the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), personal insolvencies have continued to see double-digit increases for the 10th straight quarter. 

“Canadians are facing mounting debt loads alongside a persistently high cost of living,” says André Bolduc, Licensed Insolvency Trustee and Chair of the CAIRP. “While inflation is easing, this simply means that prices aren’t climbing as quickly as before…everyday essentials like groceries still cost more than they did in the past, leaving many Canadian households grappling to manage their budgets.”

In light of this, the BoC’s current rate cutting cycle could bring optimism to consumers: according to a recent report by Equifax, debt and delinquency rates (excluding mortgages) have slowed in 2024. 

In addition, roughly 27% of respondents in Ratehub.ca’s consumer survey report that they’re paying off debt faster to avoid high interest rates, while more than 36% stated that their financial goal for the coming year is to pay off debt. 

• Also read: How to curb spending and tackle credit card debt

The skyrocketing cost of insurance, particularly home and auto insurance, is making Canadians take a closer look at their policies.

The summer of 2024 saw floods in Toronto and across Quebec, a wildfire in Jasper, and a severe hailstorm in Calgary, all of which added up to an estimated $7 billion in losses. The increasing frequency of such extreme weather events is likely to push up home insurance premiums. 

Auto insurance costs are rising as well, especially as new vehicles continue to grow in cost. The prevalence of auto theft and ineffective systems certainly doesn’t help. Drivers in Alberta, for instance, pay some of the heftiest auto insurance premiums in Canada due to having to sue for coverage. Unsurprisingly, this has triggered the appearance of ghost brokers that scam consumers with temptingly cheap insurance rates.

To address this, auto insurance reforms are in the works: Alberta is increasing its rate cap for “good” drivers, while Ontario is now allowing drivers to opt out of some elements of coverage that were previously mandatory. However, it remains to be seen whether these will reduce premiums in the long run.

The best move that Canadians can make to lower insurance costs? Shop around and switch insurers for a better deal.

• Also read: Ratehub’s life insurance predictions for 2025

Canadian savers love to take advantage of the tax-sheltering account features offered by the federal government, in particular to save for retirement or sock away enough for a home purchase. 

According to a Bank of Montreal report, the average TFSA balance was $41,510 at the end of 2023, a year-over-year increase of 9%. Ratehub.ca’s survey also found that 60% of respondents invest regularly in RRSPs and TFSAs, while 92% are using FHSAs to save for their first home downpayment. 

Unfortunately, falling interest rates is great news for borrowers but not so much for savers. Now that the Overnight Lending Rate has fallen, so too have the returns on products like high-interest savings accounts (HISAs) and GICs. 

Canadians with the means and risk appetite may seek out higher-risk investments, such as ETFs and dividend stocks, for their registered accounts. On the other hand, those simply building an emergency fund should move their money around for the best HISA rates — all while retaining near-instant access to cash.

Canadians are turning towards digital banking not just for the convenience, but for the game-changing products. Many of the winners in Ratehub.ca’s 2025 Personal Finance Awards — offering the best rates in savings, chequing, and GICs — are online-only banks or financial institutions. 

The ease of opening and funding these accounts has also made digital banking the channel of choice for younger Canadians: a Canadian Bankers Association (CBA) survey found that 70% of Canadians have used an app to do their banking, with younger adults more likely to use apps.

Likewise, digital payments remain popular thanks to e-commerce and attractive credit card rewards programs. A Payments Canada report  found that 58% of frequent credit card users mainly do so for receiving discounts, loyalty points, and other rewards. 

As consumers become more savvy with their money, digital financial services could soon become the default. This makes an even stronger case for open banking in Canada.

Looking at Ratehub.ca’s survey results, it seems Canadians are cautiously optimistic about their finances in the coming year: 44% anticipate no major changes to their finances, while 60% are focused on maintaining or improving their current financial stability. Additionally, more people are seeking out financial advice, education, and planning tools.

Whatever your money goals are for the new year, it’s a great idea to brush up on your financial literacy and understand how different accounts and investments can work for you. Ratehub has a handy library of both investing and banking basics, as well as comparison tools, to help you get started.

It’s also a great move to connect with a financial advisor, who can help you strategize the best approach for your cash flow — for example, paying down higher-interest debt or building emergency savings. Everyone’s financial situation is different, so getting a personalized plan can help you make the most of your money in 2025.

Also read:

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  • Bank of Canada rate cuts lead to improved home affordability in October
  • Predatory lending and payday loans: What it is and how to avoid it
  • 6 Financial trend forecasts for 2024