It was a welcome news alert this morning announcing that for the fourth consecutive time, the Bank of Canada has reduced the current policy rate. This 0.50% reduction will result in Prime Rate now being 5.95%.

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!

While interest rates are higher than in past years, this reduction in the Bank of Canada's policy rate is a further (and more substantial) step towards rate normalization and stabilization. This is excellent news to nearly all Canadians who are continuing to live in a world of increasing expenses and increased cost of living. For folks who are coming up for mortgage renewal or looking to enter the housing market for the first time; this announcement continues to ensure housing/shelter costs continue to move in the direction of affordability rather than move more and more out of grasp.

One of the main points of concern within the Governing Council of the BoC was the requirement for inflation to return to a point of stability after ballooning to 8.1% in June 2022. Over the past two years, inflation has been steadily declining (albeit with a handful of upticks) and as of the September 2024 reporting period, was announced at 1.6%. This inflationary reading was due in part to "lower energy prices and weaker underlying inflationary pressures". This reading was well within the BoC's acceptable band of 1%-3% and was one of the reasons for the rate reduction. It is worth noting, the Bank of Canada noted in their press release "If the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further." 

At the time of this newsletters publication, it is widely speculated that we may see an additional 0.50% cut at the BoC's meeting on December 11th, 2024. As always, this is purely speculation and these predictions are poised to change at the drop of a hat. 

Accompanying the rate announcement today, the Bank of Canada also released their final Monetary Policy Report of 2024. The report itself is a succinct 57 pages that is available for reading in the link above. In an effort to highlight a few pieces for easy digestion:

• Over the projection horizon, inflation is expected to remain close to the 2% target
• The Canadian economy continues to be in excess supply. The labour market has softened, with increases in unemployment concentrated among newcomers and youth. Wage growth remains elevated relative to productivity.
  
• Canada’s economic growth is expected to pick up gradually and average 2¼% over 2025 and 2026. Consumer spending and business investment are anticipated to strengthen, supported by decreases in interest rates.

The past two 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, our posts can be found HERE.

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

We understand that there may still be many questions and concerns amongst out clients and partners. If you're feeling stretched by monthly payments, are anxious about an upcoming renewal, or just want to chat, please reach out so we can talk. We will keep you updated as we received more information about today's announcement. The next announcement is scheduled to take place on July 24th, 2024. The final announcement of 2024 is scheduled to take place on December 11th, 2024.

OAC, E&O