BoC Rate Cut: What It Means For Mortgage Costs

BoC Rate Cut: What It Means For Mortgage Costs

BoC Rate Cut: Variable Rate Mortgage Holders to See Savings

The BoC has lowered its key interest rate for the sixth time since June, reducing it by a quarter percentage point to 3.0%. Following this move, Canada’s six major banks also announced a reduction in their prime rate from 5.45% to 5.20%.

This rate cut means homeowners with variable-rate mortgages will experience lower monthly payments. According to Ratehub.ca, a homeowner with a 10% down payment on an average-priced Canadian home ($676,640 as of December 2024) will see their monthly payment drop by approximately $87.

BoC Rate Cut: What About Fixed Mortgage Rates?

Fixed mortgage rates are also expected to decline slightly, as bond yields have dipped to around 2.8%. However, experts caution that concerns over inflation may prevent any significant reductions in fixed rates in the near future.

Better Borrowing Power for Homebuyers

Since interest rates peaked in August 2023, homeowners with variable-rate mortgages have seen their payments decrease substantially. A buyer who purchased a home at the peak with a five-year variable rate has saved an average of $685 per month.

Phil Soper, CEO of Royal LePage, believes the latest rate cut could stimulate the spring housing market. “This latest decrease arrives just before the spring housing market when demand typically picks up, which should spur buying and selling activity in the weeks ahead,” he said.

What’s Next?

While the rate cut is good news for mortgage holders, economic uncertainty – the potential US tariffs – remains a factor to watch.

For those considering a mortgage renewal or a new purchase, this could be a great time to explore options with a mortgage broker. At Client First Mortgage Solutions, we are here to help with any of your mortgage questions or concerns. Contact Us Today!

Original Article – Canadian Mortgage Trends – The Canadian Press – January 29, 2025