Today the Bank of Canada lowered it’s Overnight Target rate to 4.50% offering a little bit more relief to Canadian consumers suffering under the weight of high mortgage rates and other borrowing costs.  This puts us back to what the rate was in June 2023.

Here’s a few quick highlights I have summarized from a variety of our economists reporting this morning that led to the BoC decision today:

• The BoC commented that inflation would be less than 2% if it weren’t for the high mortgage interest and shelter costs – this is a good sign as we are getting closer to where they are comfortable
• Manufacturing sales in Canada plummeted -2.6%, another example of why lower rates will help a struggling economy
• Economic growth “likely” picked up to about 1.5% through the first half of 2024, however with population growth of about 3%,the economy’s potential output is still growing faster than GDP which means excess supply has increased
• Household spending is weak
• Unemployment rates are rising to 6.4% and taking job seekers longer to find work
• Residential investment is expected to grow robustly
• New government limits on admission of non permanent residents should slow population growth in 2025
• Shaves about $15 off monthly payments on your typical new 25-year amortized variable-rate mortgage, per $100,000 borrowed
• Next announcement is September 4, 2024

Fixed rates are still anywhere from .75% to .90% less than the Variable today so most are still choosing fixed rates which are not necessarily impacted by the Bank of Canada announcements.  Fixed Rates are driven by the bond market which did fall a bit further today so Fixed Rates are trending downward because of this.  Here is a snapshot of how the two have played out for the past 15 years.

Feel free to contact me anytime directly to chat about all things mortgages at 604-729-7940