(2.5 Min. Read)
The Bank of Canada lowered policy rate 50 basis points to 3.75%, marking the fourth consecutive decrease and the biggest of the decreases so far. This change is significant, especially as inflation is projected to remain around 2% in the coming months, and more rate cuts appear to be in the forecast.
The Benefits of Lower Interest Rates to the Housing Market
Lower interest rates mean more affordable mortgage payments, allowing you to stretch your budget further and access a wider range of homes. But what does this mean for you as a prospective buyer?
Increased Affordability: With reduced borrowing costs, monthly payments will decrease, making homeownership more attainable. This means you can purchase a property that may have previously been out of reach.
Potential for Price Appreciation Across the Long Term: Historically, lower interest rates stimulate demand in the housing market. As more buyers enter the market, home prices tend to rise. Buying now could position you to benefit from significant appreciation over the coming years.
Lag Time Before Price Increases: It’s essential to recognize that while interest rates are dropping, it may take some time for home prices to reflect this change. This lag creates a unique opportunity for buyers who act soon. Securing a home now, could allow for you to benefit from both sides of the equation: lower prices and future decreases in mortgage payments.
Planning for the Future
The Bank of Canada is expected to continue cutting rates to stimulate economic growth. If you wait too long, you may miss out on the chance to buy before prices rise. Additionally, with the economy projected to strengthen, increased demand could push prices even higher in the near future, which is great if you bought and not so good if you did not.
Max Lindsay, a mortgage broker with Mortgage Financial Corporation in Hamilton says he has seen an uptick in pre-approvals, applications and buyers preparing themselves to purchase over the last few weeks, and this announced rate reduction will only further this trend.
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Governor of the Bank of Canada, Tiff Macklem’s Quotations:
“It’s a pretty good looking story: lower inflation, lower interest rates (and) pickup in growth.”
“On the upside, we know that housing is very interest sensitive; as we lower rates we’ve got a pickup in housing in our forecast. That could happen faster and could be bigger than we’ve been expecting.”
“It’s been a long fight against inflation, but … it’s worked.”
“We’re coming out the other side, and I think Canadians can breathe a sigh of relief.”
“With today’s 50 basis point cut, that is setting the stage for growth to pick up.”
“We’ve got inflation down. We are back to low inflation….. Now we need low and stable inflation …. When I say we need to “stick the landing”, that’s what it means, that is sticking the landing.”
“We actually have been very clear about the direction of policy rate… Since we cut in June, we have been indicating that if things continue to evolve broadly inline with our forecast, we anticipate cutting our policy rate further and that’s what we have been doing.”
Wayne Bibby is a Realtor who lives and works in Seaton Village in Toronto
Full BOC Announcement here.
