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Economic Update

September 6th 2024

MORTGAGE AND MARKET UPDATE

The Bank of Canada recently announced a 0.25% rate cut, bringing the overnight rate down to 4.25%, which has also lowered the prime rate to 6.45%. This is the third rate reduction we've seen this year as the Bank moves towards a less restrictive monetary policy. If you have a variable-rate mortgage, this might offer some relief with potentially lower monthly payments. Additionally, we may see a reduction in fixed rates soon, providing an opportunity for those looking to secure a new mortgage or renew their current one.

Inflation & Economic Overview:

• Inflation: Now sitting at 2.5%, inflation has slowed significantly. Housing costs remain a major driver of inflation, but they too are starting to ease.

• Canadian Economy: Growth was stronger than expected, with the economy expanding by 2.1% in the second quarter. However, we’re seeing signs of softening, particularly in June and July. Employment growth has stalled, though wages are still rising.

• Global Outlook: International economies, including the U.S. and Europe, are growing, albeit with challenges such as weak manufacturing in Europe and sluggish demand in China. Financial conditions globally have eased, which has been reflected in lower bond yields and oil prices.

What This Means for You:

For borrowers, this is largely positive news. Monthly floating-rate payments are expected to decrease by approximately $12 to $21 per $100,000 of debt, depending on your interest rate, amortization period, and whether it's a mortgage or Home Equity Line of Credit (HELOC) This rate reduction is expected to spur demand for variable-rate products in the coming months as we anticipate more cuts.

• Variable-rate mortgages: Monthly payments may decrease, offering some relief.

• Fixed-rate mortgages: These rates could also trend downward, offering more options for those looking to lock in a rate.

• Potential Future Cuts: There’s speculation that the Bank of Canada could introduce further rate cuts, potentially translating into even lower borrowing costs over the next year.

Looking Forward:

We may see up to two more rate cuts by year-end and up to seven by the end of 2025, depending on how inflation evolves. As Canadian mortgage rates increasingly follow U.S. job market data, it’s likely that variable rates will gain more traction, especially if further reductions occur. While fixed rates, particularly shorter terms like the 3-year fixed mortgage, remain attractive, variable-rate products may offer better long-term savings during this rate-cut cycle