The Canadian real estate market is undergoing a transformative period, driven by a mix of favourable policy updates and economic changes.
On October 23, 2024, the Bank of Canada cut its key interest rate by 0.5% to 3.75%, making the prime lending rate 5.95%. This move aims to stimulate economic growth and maintain inflation near the 2% target, which recently eased to 1.6%.
The Canadian real estate market may see increased activity due to lower borrowing costs. Lower rates may gradually encourage more buyers, especially those who are interested in variable-rate mortgages. When rates go down, housing activity tends to go up. Those who own a home feel more comfortable upgrading their home when it’s close to renewal time. First-time home buyers are more confident entering the housing market, knowing their payments could be similar to a rent payment. We have already seen an increase in buyers going into multiple offers this year as rates slowly decrease.
The recent mortgage rule changes, including higher price caps for insured mortgages and extended amortization options for first-time buyers, are also expected to increase market activity. These new rules take effect on December 15, 2024. Read more 30 Year Amortizations for First-Time Home Buyers and Extended Amortizations.
The Bank of Canada included this statement in their press release, “If the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further. However, the timing and pace of further reductions in the policy rate will be guided by incoming information and our assessment of its implications for the inflation outlook. We will take decisions one meeting at a time.”
While these changes may boost demand, price pressures remain. If the timing is right for you, this may be the time to consider getting ahead of the Canadian real estate market. The next rate announcement is on December 11, 2024.