Could we see a 50-basis point rate cut in October?
Experts suggest the odds are rising for a significant rate cut – here’s what that means for homeowners and potential buyers.
In this week’s mortgage news, all eyes are on the Bank of Canada’s upcoming October 23 policy decision, while mounting speculation that a substantial 50-basis point rate cut could be on the horizon. The likelihood of this supersized rate cut is estimated at 53%, according to market analysts. Even if the Bank doesn’t opt for such an aggressive move, experts are confident that a smaller quarter-point cut is almost guaranteed.
This potential cut would mark the Bank’s fourth consecutive rate deduction since June, reflecting ongoing economic challenges such as below-trend GDP growth and easing inflation.
Here’s what you need to know:
What’s Driving The Rate Cut Speculation?
The Canadian economy is facing several hurdles that may prompt the Bank of Canada to continue easing its monetary policy. Despite a modest GDP growth of 0.2% in July, this increase isn’t enough to outpace population growth, leaving real output per person in decline for seven on the past eight quarters.
BMO senior economist Robert Kavcic notes, ” The Canadian economy continues to grind out sub-potential growth, and with inflation back at 2% target, talk of more aggressive easing continues.”
What Does This Mean For Homeowners?
For current homeowners, a rate cut could bring some relief in the form of lower mortgage payments, especially if you have a variable-rate mortgage or are nearing renewal. While a quarter-point cut may not make a dramatic difference, a full 50-basis point reduction could significantly lower monthly payments and improve affordability.
Desjardins economists L J Valencia and Randall Bartlett echo these sentiments, pointing to ongoing labor market weakness and declining per-person economic output as additional factors pushing the case for a more aggressive rate cut.
What’s Next?
Even if the Bank of Canada opts for a smaller quarter-point cut, the overall trend suggests we are moving towards rates that will hover around neutral levels or even slightly below. This could open up opportunities for both buyers and refinancers looking to lock in lower rates before the market stabilizes.
Need Mortgage Advice?
Steve D’Souza and Nathan Isherwood at Client First Mortgage Solutions are available to answer your questions and provide you expert guidance Whether you are a homeowner looking to refinance or a first-time homebuyer, we can help you make the most of the current rate environment.
Original Article – Canadian Mortgage Trends – October 1, 2024
