Bank of Canada Cuts Policy Rate Amid Slower Economic Growth

On June 5, 2024, the Bank of Canada reduced its policy interest rate by 25 basis points to 4.75%, citing easing inflation and slower-than-expected economic growth. The global economy grew by 3% in Q1 2024, while Canada's GDP grew by 1.7%, lagging forecasts. Inflation dropped to 2.7% in April, with core inflation indicators also showing a decline. The Bank remains focused on balancing demand and supply and is committed to achieving its 2% inflation target.

Impact on Home Buyers and Homeowners

First-Time Home Buyers:

• Lower Mortgage Rates: The reduction in the policy rate typically leads to lower mortgage rates, making borrowing cheaper. This can help first-time home buyers afford more expensive homes or reduce their monthly payments.
• Increased Buying Power: With lower interest rates, buyers may qualify for larger loans, increasing their options in the housing market.
• Potential Market Competition: Lower rates can drive demand, potentially increasing competition and home prices.

Current Homeowners:

• Refinancing Opportunities: Homeowners with existing mortgages might consider refinancing at lower rates to reduce their monthly payments or shorten their loan term.
• Variable Rate Mortgages: Those with variable-rate mortgages will likely see a decrease in their interest rates and monthly payments.
• Home Equity Lines of Credit (HELOCs): Lower interest rates can reduce the cost of borrowing against home equity, making it cheaper to fund renovations or other expenses.