What a way to end 2024! This morning, the Bank of Canada made their final rate announcement of the year. For the fifth consecutive time since June, the Bank of Canada decided to reduce their policy rate; this time, by 0.50%. This 0.50% reduction will result in Prime Rate now being 5.45%.

As indicated in our previous announcements, this reduction is welcome news to those who hold variable or adjustable rate mortgages and those who have secured or unsecured lines of credit. This rate cut does not have a direct correlation to fixed rate mortgages as fixed rates are priced against the bond market. If you are unsure if you are impacted by this announcement, please reach out or book a time to chat HERE!

Up until late last week, the consensus among economist was that the Bank of Canada would likely reduce rates by 0.25% - providing a small amount of reprieve as we approach 2025. Just a handful of days later, the probabilities had shifted to a 90% chance of a 0.50% cut. There were a myriad of economic happenings over the weeks leading up to the Bank of Canada decision. This included, but was not limited to, the Federal Government's GST holiday announcement, President-Elect Trump's possible tariffs on Canadian exports, mortgage rule changes coming into effect on Dec 15th, and the increased unemployment figures that were released for November 2024. This goes to show that economic predictions are still very much a nebulous thing that are changing daily (if not hourly). For a market that is still very much sensitive to these changes, this means that while predictions also change rapidly, strategy must change with it.

Interest rates continue to be a large topic of discussion as many Canadians work to return to a place of affordability in their lives. This announcement will no-doubt allow for some reprieve and hopefully will be a small step towards financial certainty in the future. 

The Bank of Canada continues to reaffirm their commitment to balance sheet normalization. Should the Bank of Canada continue to see inflation close to the middle of the 1-3% target range and see the need to continue to support growth, there are increased chances that we will continue to see further reductions in in the policy rate in 2025. As has been previously stated, decisions are guided on everchanging, incoming information and can be adjusted swifty.

The past three months have been heavy in updates and policy changes. If you need a quick summary of the most recent changes affecting First Time Home Buyers, increased cap for insured mortgages, and the utilization of unused/vacant land, click HERE to read our blog posts outlining the changes in easy to read language. 

We understand there may still be many questions and concerns amongst our clients and partners. As part of our commitment to providing the most up to date information and comprehensive support, we have recently launched our very own Canadian Mortgage App. Interested in potentially refinancing to make your monthly payments more comfortable? Click HERE to download the app and run various scenarios to see what the best fit may be. 

Information note

As always, we are here to help. If you'd like to chat about your scenario and see what options may be available for you, let us know! We will keep you updated as we received more information about today's announcement. The next announcement and Monetary Policy Report is scheduled to take place on October 23rd, 2024.

OAC, E&O