Rate Cut Overview - December 11th 2024.
- New Rate: The Bank of Canada reduced its overnight lending rate to 3.25% on December 11th, the lowest level since September 2022.
- Consecutive Cuts: This marks the fifth consecutive rate cut and the second 50 basis point cut following October’s reduction.
Economic Justifications
- Factors Driving the Decision:
- Slowing GDP growth.
- Stabilizing inflation, now within the Bank’s 2% target range, projected to remain steady for the next two years.
- Risks to Consider:
- Potential challenges from US tariff threats.
- Impacts of the GST holiday.
- Uncertainty surrounding new mortgage rules.
- Future Rate Cuts: The Bank anticipates scaling back the size and frequency of rate cuts if current trends continue.
Impact on Borrowers
- Variable Rate Mortgages:
- Prime rate will drop to 5.45%.
- Borrowers with variable-rate mortgages may see either:
- Lower monthly payments.
- A greater portion of payments applied to principal balances, reducing interest costs.
- Fixed Mortgage Rates:
- Bond yields dipped after the announcement, suggesting that fixed rates may also decline.
Real Estate Market Outlook
- Increased Demand:
- Combined with new mortgage rules effective December 15th, lower rates are expected to:
- Drive increased interest in real estate.
- Set the stage for a strong January and active spring selling season.
- Combined with new mortgage rules effective December 15th, lower rates are expected to:
This strategic rate reduction supports borrowers and could create opportunities for first-time buyers and homeowners looking to refinance or invest in property.
Just a heads-up, the Bank of Canada's next interest rate announcement is scheduled for January 29, 2025
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