In case you missed it….earlier today the Bank of Canada cut its key interest rate by 0.50%, bringing it to 3.75% after a series of smaller cuts in recent months. This larger cut was due to slower-than-expected GDP growth and weak inflation reports. While the rate is still considered restrictive, it is expected to stimulate growth and ease inflation concerns.
The Bank predicts that the policy rate could fall to 2.50% by next spring, with another possible rate cut in December if weak economic data continues. There is concern that lower rates could reignite the housing market, which is expected to rebound as rates decline. Mortgage rates are also dropping, and this is likely to lead to increased housing demand and rising home prices, although supply challenges like zoning and labor shortages may limit new construction.
What this means for Variable Rate Mortgage holders:
- For every $100K borrowed, you’ll save about $28 a month. For a $400K mortgage, that’s around $112 in monthly savings.
- In combination with the previous 3 reductions, you’ll be saving $72 a mount. For a mortgage of $400K, that’s around $288 in monthly savings
Key Points:
- Adjustable Rate Mortgage (ARM Variable): Your payments should automatically adjust in the next lender cycle. If not, give your lender (or me) a call to confirm.
- Traditional Variable Interest Rate Mortgage (VIRM Variable): Contact your lender to adjust your payment. If you’re with one of the big banks, you’re likely in a VIRM, and action on your part will be needed.
- Fixed Mortgage: No change for you
- Looking to Buy: This positive market news might bring sellers and buyers back, potentially driving prices up. If you’re in the market to buy, reach out to update your numbers and budget so you can act quickly and wisely.
The next BoC announcement is scheduled for December 11th and it is expected that we will see another 25-50bps reduction.
If you have any questions or would like to discuss your specific situation, please don’t hesitate to reach out.
Be well and talk again soon,