I have great news to share! The Bank of Canada has reduced the overnight rate by 25 basis points. Here’s their official statement:
"With continued evidence that underlying inflation is easing, the Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points. Recent data has increased our confidence that inflation will continue to move towards the 2% target."
Here’s what this means for mortgage holders, buyers, and sellers:
For Mortgage Holders:
Variable-rate Mortgages:
- Payments will remain the same, but more of each payment will go toward the principal instead of interest.
- If your mortgage had previously hit the trigger rate, it might be possible to adjust payments down if rates continue to decrease and amortization aligns.
Adjustable-rate Mortgages:
- Payments will decrease as lenders reduce their prime rates.
Fixed-rate Mortgages:
- No immediate change for existing fixed-rate mortgages.
- For upcoming renewals, the reduction in the overnight rate could signal lower fixed rates in the near future.
If You're Looking to Buy a Property:
- Historically, rate cuts by the Bank of Canada increase buyer activity.
- A recent poll of 30 realtors shows that 73% expect more buyers to enter the market, while 27% believe the rate change will have no impact.
- Based on our experience, we anticipate increased activity and more competition among buyers.
- However, affordability remains tied to fixed-rate mortgages, and the lower overnight rate does not directly impact this.
If You're Looking to Sell a Property:
- The rate cut is welcome news and can improve selling conditions.
- Inventory remains high, having increased by 60% from January to May 2023, offering buyers more choices.
The Bank of Canada will meet again on July 24th. If you have any questions about how these changes affect you, don’t hesitate to reach out. You can also book a free consultation with us using the link below:
We are always here to help.
