Ottawa, Ontario
December 11, 2024
The Bank of Canada today reduced its target for the overnight rate to 3¼%, with the Bank Rate at 3½% and the deposit rate at 3¼%. The Bank is continuing its policy of balance sheet normalization.
The global economy is evolving largely as expected in the Bank’s October Monetary Policy Report (MPR). In the United States, the economy continues to show broad-based strength, with robust consumption and a solid labour market. US inflation has been holding steady, with some price pressures persisting. In the euro area, recent indicators point to weaker growth. In China, recent policy actions combined with strong exports are supporting growth, but household spending remains subdued. Global financial conditions have eased and the Canadian dollar has depreciated in the face of broad-based strength in the US dollar.
In Canada, the economy grew by 1% in the third quarter, somewhat below the Bank’s October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports. In contrast, consumer spending and housing activity both picked up, suggesting lower interest rates are beginning to boost household spending. Historical revisions to the National Accounts have increased the level of GDP over the past three years, largely reflecting higher investment and consumption. The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force. Wage growth showed some signs of easing, but remains elevated relative to productivity.
A number of policy measures have been announced that will affect the outlook for near-term growth and inflation in Canada. Reductions in targeted immigration levels suggest GDP growth next year will be below the Bank’s October forecast. The effects on inflation will likely be more muted, given that lower immigration dampens both demand and supply. Other federal and provincial policies—including a temporary suspension of the GST on some consumer products, one-time payments to individuals, and changes to mortgage rules—will affect the dynamics of demand and inflation. The Bank will look through effects that are temporary and focus on underlying trends to guide its policy decisions.
In addition, the possibility the incoming US administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook.
CPI inflation has been about 2% since the summer, and is expected to average close to the 2% target over the next couple of years. Since October, the upward pressure on inflation from shelter and the downward pressure from goods prices have both moderated as expected. Looking ahead, the GST holiday will temporarily lower inflation but that will be unwound once the GST break ends. Measures of core inflation will help us assess the trend in CPI inflation.
With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, Governing Council decided to reduce the policy rate by a further 50 basis points to support growth and keep inflation close to the middle of the 1-3% target range. Governing Council has reduced the policy rate substantially since June. Going forward, we will be evaluating the need for further reductions in the policy rate one decision at a time. Our decisions will be guided by incoming information and our assessment of the implications for the inflation outlook. The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
Information note
The next scheduled date for announcing the overnight rate target is January 29, 2025. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.
Refinancing your mortgage can be a smart financial move for many reasons, and as your trusted mortgage advisor, I’ve seen how much it can benefit homeowners!
Ideally, refinancing is done at the end of your mortgage term to avoid penalties, but the timing can vary depending on your goals. For some, it’s about unlocking the equity in their home to fund renovations or cover big expenses like college tuition. For others, it’s an opportunity to consolidate debt, lower their interest rate, or change up their mortgage product.
Let’s take a closer look at some of the ways refinancing your mortgage can help!
Consolidate Debt: When it comes to renewal season and considering a refinance, this is a great time to review your existing debt and determine whether or not you want to consolidate it onto your mortgage. In most cases, the interest rate on your mortgage is less than you would be charged with credit card companies or other forms of financing you may have. Plus, having all your debt consolidated into a single payment can keep you on track!
Unlock Your Home Equity: Do you have projects around the house you’ve been dying to get started on? Need funds for a large purchase such as a new vehicle or post-secondary education? When you are looking to renew your mortgage, it is a great opportunity to consider refinancing in order to take advantage of the home equity you have built up to help with these larger changes in your life!
Change Your Mortgage Product: Are you unhappy with your existing mortgage product? If you have a variable-rate or adjustable-rate mortgage, you may be considering locking it in at the lower rates. Alternatively, you may want to switch your current fixed-rate mortgage to a variable option with the interest rates expected to continue decreasing into 2025. You can also utilize your refinance to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!
PLUS! Some latest changes by the Government of Canada will make it even easier for you when it comes to your renewal and refinancing options:
Those of you who may have an uninsured mortgage will no longer have to pass the stress test as of November 21st. This means that you have more flexibility when it comes to rates and mortgage products in renewal or refinance cases in cases where you wish to switch lenders without adding additional funds to your mortgage!
Beginning January 15, the federal government will allow default-insured mortgages to be refinanced to build a secondary suite. If you’ve been considering adding a suite to your property, you may be eligible to access up to 90% of your home’s equity for this purpose.
No matter your plans or situation, please don’t hesitate to reach out to me for expert mortgage advice!
Looking for some creative and thoughtful DIY holiday gifting ideas that are easy to make and can add a personal touch to your gifts this season? These affordable, fun, and personalized options can suit anyone in your life – and they’ve never been easier to make!
The season of giving has never been easier with these affordable, fun and personalized gift ideas for all those special folks in your life!
BREAKING NEWS
The Bank of Canada has lowered its policy rate by 50 bps to 3.75%
The Bank of Canada has lowered its benchmark rate by 50 bps, bringing it down to 3.75%. This marks the fourth consecutive cut since June.
"The Bank of Canada's decision to lower the interest rate to 4.00% is a positive step toward improving housing affordability across Canada. This move will help alleviate some of the financial strain that middle-class families, homeowners, and first time buyers have been facing in recent years. While interest rates remain high, we're encouraged by the Bank's decision to ease rates, alongside recent government changes we’ve long advocated for, such as removing the stress test, extending 30-year amortizations for first-time buyers, and raising the mortgage insurance cap to $1.5 million. These combined measures are bringing us closer to restoring the dream of homeownership for Canadians, but there is still more work to be done.”
- Lauren van den Berg, President and CEO of Mortgage Professionals of Canada.
Now is the perfect time for brokers to reach out to clients, particularly those with variable-rate mortgages, and offer timely advice on how this rate cut impacts their financial situation. Also, the effects to fixed rates, which are adjusted based on bonds, remain to be seen. We will monitor clients closing in the next 4 months to ensure we have the lowest fixed rate possible.
The next rate announcement is scheduled for Wednesday, December 11, 2024.
Call us to review your financing!
If the cap on insured mortgages increases from $1 million to $1.5 million, this could significantly impact the housing market. Here are some potential effects:
Increased Access to Financing: Buyers looking for higher-priced homes will have more access to insured mortgage options, making it easier to finance larger purchases.
Market Dynamics: This change could stimulate demand in the higher-end market, potentially driving up prices in certain areas.
Encouragement for Buyers: With a higher cap, buyers may feel more confident entering the market, knowing they can secure favorable financing for larger homes.
Potential Risks: While it may help some buyers, it could also increase risks for lenders if higher loan amounts lead to more defaults in economic downturns.
Impact on Affordability: While this change could assist some buyers, it might also contribute to affordability challenges in competitive markets, as higher limits could lead to increased competition and prices.
1.5 million dollars required $300,000 down and under new rules buyers can purchase with $125,0000 down as a minimum. Calculating downpayment is 5% of the first $500,000 and 10% of the remainder. Standard insurance premiums apply and are added to the mortgage based on downpayment. If a first-time buyer, the client is allowed to take a 30-year amortization for an additional .20% insurance premium. That is a home purchase with $175,000 less downpayment!
If first-time buyers are allowed to use 30-year amortizations after December 15, 2024, this could have several significant implications:
A $850,000 house purchase with a minimum down of $60,000 has a payment of $4451.91 on 25 years and $4050.59 on 30 years. The payment difference is $401.32/month and income required to purchase this house is $10,000 less for the 30-year amortization. Allowing families with disruption to income due to maternity leave, a bit more wiggle room in qualifying for a home purchase.
Staying informed about these changes and their implications is essential for both buyers and the market overall! If you have specific questions or need more information, let me know! Call or email me if you wish to discuss how the rules can help you purchase!
In August, a total of 539 homes were sold in the Waterloo Region via the (MLS) System of the Cornerstone Association of REALTORS This represents a decrease of 5.3 per cent compared to the same period last year and a decline of 24.1 per cent compared to the average number of homes sold in the previous ten years for the same month.
“Despite a cooling market, detached homes continue to see strong demand, reflected in a 6.0 percent increase in sales year-over-year,” says, spokesperson for the Waterloo Region market area. “With home prices showing stability in recent months and interest rates decreasing, we saw some home buyers finally come out from the wings to take advantage of the summer slowdown to seek out specific property types, like single-family homes.”
Total residential sales in August included 335 detached homes (up 6.0 per cent from August 2023), and 103 townhouses (down 22.6 per cent). Sales also included 60 condominium units (down 18.9 per cent) and 40 semi-detached homes (down 11.1 per cent).
In August, the average sale price for all residential properties in Waterloo Region was $769,203. This represents a 1.1 per cent increase compared to August 2023 and a 1.7 per cent decrease compared to July 2024.
The average price of a detached home was $889,085. This represents a 0.8 per cent increase from August 2023 and a decrease of 2.7 per cent compared to July 2024.
The average sale price for a townhouse was $611,164. This represents a 7.5 per cent decrease from August 2023 and a decrease of 1.5 per cent compared to July 2024.
The average sale price for an apartment-style condominium was $457,075. This represents a decrease of 5.8 per cent from August 2023 and a decrease of 7.7 per cent compared to July 2024.
The average sale price for a semi was $654,070. This represents a decrease of 2.8 per cent compared to August 2023 and a decrease of 1.9 per cent compared to July 2024.
The average time it took to sell a home in August was 25 days, which is three days longer than the previous month. In August 2023, it took 19 days for a home to sell, and the five-year average is 19 days.
Market is heating up in September due to recent rate reductions, call us to start your shopping and move this fall!!!
