Real estate experts say the Bank of Canada’s (BoC) third consecutive interest rate cut is welcome news for homeowners with Variable-rate mortgages. It will however take time before the broader housing market feels the impact. 
Variable-Rate Mortgage Holders: A Relief on the Horizon?
Last week, the BoC reduced its key lending rate to 4.25%, aiming to counter softness in the economy and easing inflation. For those with variable-rate mortgages, the cut translates into a slight reduction in monthly payments – approximately $15 less per $100,000 of mortgage for every quarter-point decrease.
While this offers some relief, experts caution that it might not be enough to stimulate significant real estate activity. Mortgage rates haven’t fallen quickly enough to make home buying substantially more affordable. High home prices continue to present a barrier for many prospective buyers.
Fixed-Rate Holders: Waiting for Renewal
Fixed-rate mortgage holders, on the other hand, won’t benefit from the BoC’s rate cuts until their renewal date. Even if rates drop by a full percentage point, many experts believe this decrease won’t significantly boost purchasing power given current home prices.
More Rate Cuts to Come?
The Bank of Canada’s governor has suggested that if inflation continues to ease, further rate cuts could follow later this year. However, if inflationary pressures intensify, the pace of cuts could slow. With Canada’s annual inflation rate at 2.5% in July, homebuyers may need to wait for more substantial decreases before diving back in the market.
Conclusion
Variable mortgage rates are poised to decrease, making them more attractive. But as we’ve learned from the recent rate hike cycle, uncertainty remains.
Original article: www.canadianmortgagetrends.com
