How the Bank of Canada’s Expected Rate Cut Could Shape the Real Estate Market
- Sydney Fisher
- Dec 9, 2024
- 2 min read
The Bank of Canada (BoC) is anticipated to reduce its key interest rate by 50 basis points during its upcoming policy meeting on December 11, 2024. This expected adjustment would lower the overnight rate to 3.25%, marking the fifth consecutive rate cut since June. Reuters
Economic Indicators Prompting the Rate Cut
Several economic indicators have influenced this anticipated decision:
Rising Unemployment: Canada's unemployment rate increased to 6.8% in November, up from 6.5% in October, reaching its highest level since January 2017, excluding the pandemic period.
Sluggish Economic Growth: The nation's Gross Domestic Product (GDP) grew at an annualized rate of 1% in the third quarter, falling short of the BoC's forecast of 1.5%.
Stable Inflation: Inflation has aligned with the BoC's 2% target, allowing the central bank to implement further rate cuts to stimulate economic activity.
Implications for the Real Estate Market
A reduction in the BoC's interest rate can have significant effects on the real estate sector:
Lower Borrowing Costs: A decrease in the benchmark rate typically leads to reduced mortgage rates, making home loans more affordable and potentially boosting housing demand.
Increased Buyer Activity: More affordable financing options may encourage prospective buyers to enter the market, leading to heightened competition and possibly driving up property prices.
Refinancing Opportunities: Current homeowners might consider refinancing existing mortgages at lower rates, resulting in decreased monthly payments and increased disposable income.
Considerations for Sellers
For those looking to sell property, the anticipated rate cut could present favourable conditions:
Enhanced Market Appeal: Lower interest rates can attract a larger pool of potential buyers, increasing the likelihood of a quicker sale at a desirable price.
Strategic Timing: Listing properties shortly after the rate cut may capitalize on the surge in buyer interest, potentially leading to multiple offers and favourable terms.
In summary, the expected 50 basis point reduction by the Bank of Canada reflects its response to current economic challenges. This move is poised to influence the real estate market by making borrowing more accessible, affecting buyers and sellers in the coming months.
Ready to take advantage of lower interest rates? Whether you're looking to buy, sell, or refinance, now is the perfect time to act. Contact us today for expert guidance on navigating the shifting real estate market and making the most of these opportunities!
(519) 804-400
References
Reuters. (2024, December 6). Bank of Canada to slash rates by another 50 bps on Dec. 11 - Reuters poll. Retrieved from https://www.reuters.com/markets/rates-bonds/bank-canada-slash-rates-by-another-50-bps-dec-11-2024-12-06/
Morningstar. (2024, November 29). Canada Economic Growth Slows Sharply, Setting Up Possible Jumbo Rate Cut. Retrieved from https://www.morningstar.ca/ca/news/257888/canada-economic-growth-slows-sharply-setting-up-possible-jumbo-rate-cut.aspx
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