Homeowners with variable-rate mortgages to feel some impact of interest rate cut
Real estate experts say the Bank of Canada’s third consecutive interest rate cut will be cheered by those with variable-rate mortgages, but it could still be a while yet before lower borrowing costs translate into a meaningful boost to sales activity.
“It’s good news that the Bank of Canada is continuing to lower the overnight rate, though we are not likely to see the effects in the housing market for quite some time,” said Ratesdotca mortgage and real estate specialist Victor Tran in a statement.
“The reality is the math just doesn’t make sense for many people who want to purchase a home. Mortgage rates have not come down nearly fast enough to stimulate much activity in the housing market. It’s just not affordable for people.”
The central bank brought its key lending rate to 4.25 per cent on Wednesday amid softness in the economy and easing inflation.
Tran said that for every quarter-percentage-point decrease, a homeowner with a variable-rate mortgage can expect to pay approximately $15 less per $100,000 of mortgage in monthly payments.
Meanwhile, fixed-rate mortgage holders will not see the effects of any mortgage rate decreases until renewal.
“Though it sounds like a lot, even a drop of a full percentage point from current mortgage rates would not result in a significant increase in buying power given persistently high home prices,” said Tran.
Bank of Canada governor Tiff Macklem said if inflation continues to ease as expected, it is “reasonable” to expect more rate cuts this year.
The central bank brought its key lending rate to 4.25 per cent on Wednesday amid softness in the economy and easing inflation.
Tran said that for every quarter-percentage-point decrease, a homeowner with a variable-rate mortgage can expect to pay approximately $15 less per $100,000 of mortgage in monthly payments.
Meanwhile, fixed-rate mortgage holders will not see the effects of any mortgage rate decreases until renewal.
“Though it sounds like a lot, even a drop of a full percentage point from current mortgage rates would not result in a significant increase in buying power given persistently high home prices,” said Tran.
Bank of Canada governor Tiff Macklem said if inflation continues to ease as expected, it is “reasonable” to expect more rate cuts this year.
“Variable mortgage rates are looking more attractive as they’re poised to lower in the near future, but if we’ve learned anything from the Bank of Canada’s rate hiking cycle, nothing is certain.”
This article was first reported by The Canadian Press
