Interest Rate Reduction is Good News for Homeowners With Adjustable-Rate Mortgages, Say Experts

Real estate experts are optimistic about the Bank of Canada’s third consecutive interest rate cut, especially for those with variable-rate mortgages. However, it may take some time before the lower borrowing costs have a significant impact on sales activity.

Victor Tran, a mortgage and real estate specialist at Ratesdotca, stated, “It’s good news that the Bank of Canada is continuing to lower the overnight rate, though we are not likely to see the effects in the housing market for quite some time. The reality is the math just doesn’t make sense for many people who want to purchase a home. Mortgage rates have not come down nearly fast enough to stimulate much activity in the housing market. It’s just not affordable for people.”

The central bank reduced its key lending rate to 4.25 percent on Wednesday due to economic softness and easing inflation. Tran explained that with each quarter-percentage-point decrease, homeowners with variable-rate mortgages can expect to save around $15 per $100,000 of mortgage in monthly payments.

On the other hand, fixed-rate mortgage holders will not see any impact from the rate decreases until their renewal.

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Penelope Graham, a mortgage expert at Ratehub.ca, mentioned that the bank’s previous rate cuts in June and July did not have a significant impact on real estate demand. Prospective homebuyers are waiting for more substantial decreases before making a purchase.

Graham added, “With mortgage rates regularly changing, it’s crucial for mortgage borrowers to shop around for their best rate. Variable mortgage rates are looking more attractive as they’re poised to lower in the near future, but if we’ve learned anything from the Bank of Canada’s rate hiking cycle, nothing is certain.”