{"id":24831,"date":"2024-10-29T10:10:16","date_gmt":"2024-10-29T17:10:16","guid":{"rendered":"https:\/\/www.roryc.ca\/blog\/?p=24831"},"modified":"2024-10-17T11:21:12","modified_gmt":"2024-10-17T18:21:12","slug":"quicker-steeper-interest-rate-cuts-are-expected-from-the-canadian-central-bank","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2024\/10\/quicker-steeper-interest-rate-cuts-are-expected-from-the-canadian-central-bank\/","title":{"rendered":"Quicker &#038; Steeper Interest Rate Cuts are Expected from The Canadian Central Bank"},"content":{"rendered":"<p style=\"text-align: justify;\">The Bank of Canada is widely expected to cut its headline interest rate by an additional 2% or 2.5% points in the coming year, but fixed rates for five-year and three-year mortgages will likely drop by much smaller amounts.<\/p>\n<p style=\"text-align: justify;\">That\u2019s because banks and mortgage providers often set their long-term mortgage rates based on the performance of bond markets. In general, weaker bond yields tend to align with lower rates, while stronger ones correspond with higher rates.<\/p>\n<p style=\"text-align: justify;\">BMO senior economist Robert Kavcic says bond markets dropped considerably over the summer as they priced in universally expected rate cuts from the US and Canadian central banks throughout 2024 and early 2025.<\/p>\n<p style=\"text-align: justify;\">But in the last couple weeks, the bond market saw a small rebound as the US economy showed unexpected strength, and there\u2019s some debate as to what it all means going forward.<\/p>\n<p style=\"text-align: justify;\">\u201cIn the last couple weeks that momentum has stalled out because expectation of rate cuts, especially in the US has been dialled back, and that has a spillover effect in Canada because our bond yields have alignment with the US,\u201d Mr. Kavcic said in an interview.<\/p>\n<p style=\"text-align: justify;\">He added that Tuesday\u2019s lower-than-expected inflation report means that quicker and steeper interest rate cuts are expected from the Canadian central bank. At 1.6% in September, the inflation rate dropped below 2% for the first time in more than three years.<\/p>\n<p style=\"text-align: justify;\">Mortgage rates for five-year fixed terms are floating just above the 4% mark at many financial institutions in early October; rates under 4% were available at some institutions in September. Mr. Kavcic and other experts expect that five-year rates will bottom out somewhere between 3.5% and 4% in 2025.<\/p>\n<p style=\"text-align: justify;\">Ron Butler, a Toronto-area mortgage broker, said he has no doubt that mortgage rates will continue to fall, especially as the Canadian economy struggles to rebound at the same pace as our neighbours to the south, meaning that further interest cuts are much needed.<\/p>\n<p style=\"text-align: justify;\">However, he agrees that fixed five-year mortgage rates will reach a low somewhere between 3.5% and 4%.<\/p>\n<p style=\"text-align: justify;\">\u201cIt\u2019s important for the Canadian consumer to realize there\u2019s not going to be a 2.9% rate this year or next year, it\u2019s not in the cards,\u201d said Mr. Butler.<\/p>\n<p style=\"text-align: justify;\">For Canadian buyers actively looking to purchase a home, experts say the coming months could be a period where interest rates are relatively low, while the real estate market remains quiet.<\/p>\n<p style=\"text-align: justify;\">Mr. Kavcic said he expects buyers may start re-entering the market in early or mid-2025, once the five-year fixed rate dips solidly below 4%.<\/p>\n<p style=\"text-align: justify;\">\u201cWhen you get mortgage rates at something below 4%, I don\u2019t want to say it becomes affordable or overly compelling for an investor, but at least it\u2019s not completely unreasonable any more at that level,\u201c said Mr. Kavcic.<\/p>\n<p style=\"text-align: justify;\">\u201cYou\u2019ll incrementally start to get some people coming back into the market.&#8221;<\/p>\n<p style=\"text-align: justify;\">Mr. Butler said people who are purchasing now should seriously consider variable-rate mortgages, if their financial situation can handle the risk associated with them.<\/p>\n<p style=\"text-align: justify;\">\u201cWhat we say to anybody who can handle it is take variable, because in around four months the variable will be about the same as you\u2019re taking for a three-year fixed,\u201d said Mr. Butler.<\/p>\n<p style=\"text-align: justify;\">He said the added benefit of a variable-rate mortgage is the opportunity to lock in a rate down the road, giving people an opportunity to secure a better fixed interest rate in the coming months.<\/p>\n<p style=\"text-align: justify;\">\u201cIf we end up at rates below 3.98%, wouldn\u2019t you like to have a chance to lock in to those rates?\u201d he asked.<\/p>\n<p><a href=\"https:\/\/www.biv.com\/news\/real-estate\/interest-rates-have-further-to-fall-but-fixed-mortgage-rates-are-already-nearing-their-bottom-9667163\" target=\"_blank\" rel=\"noopener\">Interest Rates Have Further to Fall, But Fixed Mortgage Rates are Already Nearing Their Bottom<\/a> by Salmaan Farooqui | The Globe and Mail | BIV<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Bank of Canada is widely expected to cut its headline interest rate by an additional 2% or 2.5% points in the coming year, but fixed rates for five-year and &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2024\/10\/quicker-steeper-interest-rate-cuts-are-expected-from-the-canadian-central-bank\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9,13],"tags":[],"class_list":["post-24831","post","type-post","status-publish","format-standard","hentry","category-mortgage","category-real-estate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Quicker &amp; Steeper Interest Rate Cuts are Expected from The Canadian Central Bank &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2024\/10\/quicker-steeper-interest-rate-cuts-are-expected-from-the-canadian-central-bank\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Quicker &amp; 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