How the Latest Bank of Canada Rate Cut Impacts the Real Estate Market and Borrowers – October 23, 2024

On Wednesday, October 23, 2024, the Bank of Canada made a significant move by cutting its policy rate by half a percentage point to 3.75%. This is the fourth consecutive rate cut since June and the largest since the 2009 financial crisis, excluding COVID pandemic-related cuts. The reduction follows a drop in inflation to 1.6%, below the Bank of Canada’s 2% target.

Relief for Borrowers

Canadians with variable-rate mortgages will see immediate relief as lower interest rates reduce monthly payments. This is especially beneficial for those renewing their mortgages soon, offering the potential for better terms. Bank of Canada governor Tiff Macklem emphasized that the rate cut is intended to stimulate growth while keeping inflation in check, which could lead to increased home sales as affordability improves.

Impact on Home Sales and Prices

The central bank’s report forecasts a recovery in home sales driven by declining borrowing costs. Lower rates are expected to attract more buyers, which is good news for sellers as increased demand can push up prices. However, with Canada’s limited housing supply, competition may remain fierce, particularly in high-demand areas like Toronto, Vancouver, and Calgary.

Long-Term Effects on Real Estate

In the long term, lower rates may encourage new home construction, easing Canada’s housing shortage. For real estate investors, this rate cut presents opportunities to explore new investments or refinancing options.

Looking Ahead

Future Bank of Canada rate decisions will depend on economic data, and further cuts may follow. Homebuyers and investors should stay informed, as changes in rates directly affect mortgage affordability.

At Osuji & Smith, our real estate team is here to help you navigate these changes. Whether you are a first-time buyer or looking to refinance, we can guide you through how these rate cuts may impact your next real estate transaction. Contact us today to learn more.

Author: Harsimrat Singh Nahal