What this means for Homeowners and Prospective Buyers
The Bank of Canada (BOC) has made its highly anticipated rate announcement, delivering the expected rate cut. This move offers significant encouragement for prospective homeowners and relief for those with variable-rate mortgages.
Recent Rate Cut Details
The BOC has reduced the Benchmark Rate by a quarter point, bringing it down to 4.50% from the previous 4.75%. This reduction is accompanied by hints of further rate cuts in the near future.
Good News for Variable-Rate Mortgage Holders
If you currently hold a variable-rate mortgage, you can anticipate a reduction in your payments. For every $100,000 owing, your payments are expected to drop by approximately $15. When considering the rate cut effective from June 5, 2024, you’re looking at a total saving of roughly $30.00 per $100,000 owed. For a $500,000 mortgage, this translates to a reduction of $150.00 per month or $1,800 annually, assuming no further rate cuts this year. Given the BOC’s positive outlook, additional savings may be on the horizon!
Boosting Confidence for Prospective Buyers
For those looking to enter the housing market, a quarter-point reduction in the prime lending rate might seem modest, especially for those wary of variable-rate mortgages. However, this rate cut has a positive impact on bond yields, which in turn affects fixed-rate mortgages. Lower bond prices can drive down fixed rates offered by lenders, enabling buyers to qualify for larger loans and potentially buy more expensive properties.
The Advantages of Getting Pre-Approved
If you or someone you know is planning to purchase a home in the next 4-6 months, securing a pre-approval is crucial. A pre-approval not only provides peace of mind but also locks in your rate for the next 120 days. As rates are expected to continue their downward trend, having a pre-approval will allow you to benefit from lower rates as they become available.
Should You Wait to Purchase?
With housing prices remaining flat, high inventory levels, and interest rates on the decline, the current market is favorable for buyers. However, as rates decrease and pent-up demand builds, there could be a surge of buyers entering the market. This influx might quickly reduce inventory levels, leading to higher prices, increased competition, multiple offers, and even properties selling above asking price—similar to the trends seen in the 2019 and 2022 housing markets. Serious buyers should act swiftly; the window of opportunity may close sooner than expected.
For personalized advice and to explore your mortgage options, don’t hesitate to contact us. We’re here to help you navigate these changes and make the most of the current market conditions.
https://www.bankofcanada.ca/2024/07/fad-press-release-2024-07-24/
