Canada’s Evolving Interest Rate Landscape: What to Expect in the Months Ahead In recent months, the Bank of Canada (BoC) has been on a mission to stabilize the Canadian economy by adjusting interest rates. The latest move—a half-point cut in October, bringing the policy rate to 3.75%—indicates the BoC’s readiness to support economic growth in the face of low inflation and tepid GDP growth. This blog post dives into the current interest rate environment in Canada, examining the BoC’s recent decisions, economic indicators, and expectations for further rate cuts as we approach the end of 2024. A Look Back: The October Rate Cut The BoC’s recent half-point cut was a notable shift in its gradual easing cycle, which had initially seen three consecutive quarter-point cuts since June. The primary driver behind this more aggressive cut was the rapid decline in inflation. Consumer Price Index (CPI) inflation fell to 1.6% in September, well below the BoC’s 2% target, marking the first significant undershoot in years. Governor Tiff Macklem emphasized that this move was necessary to prevent an excessive slowdown in the economy, as low inflation paired with weak growth signals an urgent need to balance supply and demand. Macklem remarked at the October press conference, “We took a bigger step today because inflation is now back to the 2-per-cent target, and we want to keep it close to the target.” By making a decisive cut, the BoC aims to prevent economic stagnation and keep inflation from falling further, potentially boosting consumer spending and investment. Key Economic Indicators to Watch As we approach the next interest rate announcement on December 11, several data points will be crucial in guiding the BoC’s decision: August GDP Data (October 31): August’s GDP numbers, released by Statistics Canada, will offer insight into the economy’s performance and help shape the BoC’s policy stance. Weak GDP growth in recent months has reinforced the case for easing, with third-quarter growth at only 1.5%, below the economy’s potential. Employment Data (November 9): Job market conditions will be critical. While employment remains steady, any signs of weakening could prompt additional action from the BoC to support labor demand and economic resilience. Inflation Data (November 19): Inflation will continue to be a key factor. Following the October dip, analysts expect inflation to hover near the 2% target. Sustained low inflation will likely encourage the BoC to maintain its easing bias. As Macklem has stated, these data points will influence “the timing and pace of further interest rate cuts.” The BoC remains committed to a cautious approach, waiting for economic data before making further cuts, especially as it assesses whether the Canadian economy is recovering from recent softness. The Influence of U.S. Monetary Policy The U.S. Federal Reserve’s decisions also impact the BoC’s policy, as Canada’s economy is closely linked to the United States. Following a half-point cut in October, the Fed is expected to reduce rates by another quarter-point at its next meeting on November 7. However, Canada’s rate-cutting cycle has been more aggressive, partly due to the relative strength of the U.S. economy compared to Canada’s. Economists have noted that the BoC must be cautious of diverging too far from the Fed to avoid putting downward pressure on the Canadian dollar. As Tu Nguyen, economist with RSM Canada, highlights, “deviating too far from the Fed risks causing the loonie to lose even more value.” While a weaker dollar can boost exports, it can also increase the cost of imports, potentially leading to inflationary pressures. Thus, while the BoC has room to cut, it must balance domestic needs with external pressures from the Fed’s policy direction. Perspectives from Economists on Further Cuts Economists widely agree that additional rate cuts are likely, though there’s some debate over the size of future cuts. Here’s a look at differing perspectives: Royce Mendes, Desjardins Securities: Mendes notes that while the October cut was bold, the BoC may prefer 25-basis-point cuts moving forward. With U.S. economic strength in mind, Mendes believes the BoC is inclined to ease cautiously. James Orlando, TD Economics: Orlando sees further cuts on the horizon, noting that inflation has dropped below target, and GDP growth remains slow. He projects an additional 150 basis points of cuts through 2025, bringing the rate closer to 2.25%. Stephen Brown, Capital Economics: Brown believes another 50-basis-point cut in December is possible, as Canada’s economy faces excess supply and modest growth projections. He argues that a more “neutral” policy stance is warranted. How Rate Cuts Could Impact the Housing Market and Mortgages Lower interest rates are generally favorable for the housing market, as they reduce borrowing costs for homebuyers. However, the impact on mortgage rates may be slower than anticipated. While variable-rate mortgage holders will experience immediate relief, the recent cut has had limited impact on fixed mortgage rates, which are more closely tied to bond yields. Robert Kavcic, senior economist at BMO, notes that “five-year mortgage rates have been hovering above the 4 per cent mark” and may not dip significantly until more cuts occur. Additionally, recent federal changes to mortgage rules, effective mid-December, aim to stimulate the housing market. These combined factors could support a gradual recovery in housing demand, although affordability remains a key issue for many buyers. The Road Ahead: What to Expect in December and Beyond The BoC’s next steps will depend heavily on the incoming data. If the Canadian economy shows signs of growth recovery, the central bank may proceed with smaller, more measured rate cuts. However, if economic indicators continue to show weakness, a larger 50-basis-point cut may be on the table in December. The BoC’s updated projections for GDP growth and inflation will provide insight into its policy outlook. Notably, the central bank aims to avoid an economic recession while supporting consumer confidence. The BoC’s conservative approach to inflation and economic stability suggests that cuts will likely continue, albeit at a cautious pace, into 2025. Conclusion: A Time of Transition for the Canadian Economy The Canadian economy stands at a crossroads, with low inflation and slow growth prompting the BoC to ease policy more aggressively than expected. While the economy is grappling with excess supply and slow demand, the BoC’s rate cuts offer hope for a gradual recovery. Moving forward, close attention to GDP, employment, and inflation data will guide policymakers as they navigate this uncertain environment. For Canadians, these rate cuts mean potential relief in borrowing costs, particularly for those with variable-rate mortgages. However, fixed-rate mortgage holders and prospective buyers may need to wait until rates drop further to see significant benefits. The BoC remains cautious in its approach, focusing on stabilizing the economy without reigniting inflation—a delicate balance that will shape Canada’s economic landscape well into 2025. For more updates on Canada’s interest rates and economic outlook, stay tuned for the BoC’s next announcement on December 11.   Disclaimer: The information provided in this blog post is for general informational purposes only and does not constitute personalized real estate, financial, or legal advice. Every individual's situation is unique, and the strategies or tips discussed may not be suitable for all circumstances. We recommend consulting with a real estate professional, accountant, or lawyer before implementing any approaches mentioned to ensure they align with your specific needs and circumstances.

Market Remains Stable with Increased Sales Activity October 2024 continued to show a stable real estate market in Victoria, BC, with 654 properties sold—a 60.7% jump from the 407 sold in October 2023 and a 14.5% increase from September 2024. This rise in sales activity, though substantial, aligns more closely with the ten-year average, reflecting a balanced market as we move deeper into fall. Sales Breakdown: Condominiums: Sales increased by 32.6% year-over-year, with 187 units sold. Single-Family Homes: Sales saw a significant rise of 76.2% compared to October 2023, with 340 homes sold. 2024 Victoria Real Estate Board Chair-Elect Dirk VanderWal commented on the market's current dynamics: “Sales did increase notably over last year, but it’s essential to add context. October 2023 had the fewest sales in that month since 2008, which makes the year-over-year comparison appear more drastic. Last month’s sales numbers align with the ten-year average for October, indicating a return to more typical market conditions. Inventory levels have been stable, creating a more balanced market for buyers and sellers.” Inventory and Market Conditions At the end of October 2024, there were 3,161 active listings on the MLS®, marking a 6% decrease from September but a 14.7% increase from October 2023. This steady inventory provides buyers with choices, though desirable homes can still attract interest. VanderWal noted, “With recent rate drops from the Bank of Canada, we may see more activity as November begins the typical winter slowdown. Even with elevated sales, we’re in a comfortable environment for negotiation. Fewer multiple offers and more decision-making time create an ideal market for both buyers and sellers.” Pricing Trends Single-Family Homes: The MLS® HPI benchmark for a single-family home in the Victoria Core was $1,300,200 in October 2024, a slight year-over-year decrease of 0.8% from $1,310,100 in October 2023 and up from September’s $1,279,700. Condominiums: The benchmark value for a condominium in the Victoria Core decreased by 5.4%, from $578,800 in October 2023 to $547,800 in October 2024, also down from September’s $553,400. Looking Ahead to the Winter Market As we transition from fall, October’s steady activity hints at a balanced winter season. With prices stable and inventory sufficient, both buyers and sellers can approach the market with confidence. For tailored insights and strategic guidance, reach out to your local REALTOR®. For more detailed statistics and market updates, visit the Victoria Real Estate Board.

Huge Opportunity: Longer Mortgages and Higher Price Cap Estimated Reading Time: 12-15 minutes Are you in the market for a home or considering an investment in real estate? Recent changes to Canada Mortgage and Housing Corporation (CMHC) guidelines have introduced significant updates that could impact how you approach home buying or investing in real estate. With these new mortgage rules in effect, it’s important to understand what’s changed and how it may affect your financial decisions moving forward. Whether you're a first-time buyer or a seasoned homeowner, navigating these changes is key to making informed decisions in the evolving real estate landscape. What are Insured Mortgages? An insured mortgage is one that has been backed by a mortgage insurance provider, such as CMHC, to help homebuyers who might not have a large down payment secure a mortgage. For buyers with less than 20% of the purchase price as a down payment, mortgage insurance allows them to obtain financing while protecting lenders in case of default. In exchange, buyers pay a mortgage insurance premium, typically added to their monthly mortgage payments. Historically, the Canadian government has set specific rules for insured mortgages, including caps on the property value and amortization period. These guidelines ensure that buyers remain financially secure, and the real estate market remains stable. But now, with new CMHC guidelines in place, there are expanded opportunities for homebuyers—particularly for those purchasing new builds. What’s Changing with the 2024 CMHC Guidelines? 1. 30-Year Insured Mortgages for First-Time Buyers on New Builds One of the most significant changes is the extension of insured mortgage amortization periods to 30 years for first-time homebuyers purchasing new builds, including condos. This means that eligible buyers can now stretch their mortgage payments over a longer period, lowering monthly costs and making homeownership more affordable. This change, effective August 1, 2024, is part of the federal government’s effort to make housing more accessible to younger generations, particularly Millennials and Gen Z. 2. Increased Price Cap for Insured Mortgages Effective December 15, 2024, the price cap for insured mortgages will rise from $1 million to $1.5 million, reflecting the current realities of Canada’s housing market. In cities where home prices have soared, this increase will allow more buyers to qualify for an insured mortgage with a down payment of less than 20%. This change could open up opportunities in areas where the previous cap was too restrictive, making it easier for homebuyers to enter the market. 3. Expanding 30-Year Amortizations Beyond First-Time Buyers Starting December 15, 2024, 30-year mortgage amortizations will also be available to all buyers of new builds, not just first-time buyers. This update incentivizes the construction of new housing and supports the federal government's broader plan to tackle the housing shortage by building nearly 4 million new homes. By making it easier to finance new builds, the government aims to encourage more home construction and help address the housing supply issue. 4. More Flexibility in Switching Lenders A final key update relates to insured mortgage renewals. With the introduction of the strengthened Canadian Mortgage Charter, all insured mortgage holders can now switch lenders at renewal without undergoing another mortgage stress test. This change, effective August 2024, makes it easier for homeowners to seek out better mortgage deals at renewal, increasing competition among lenders and helping consumers secure the lowest possible rates. How These Changes Could Impact Homebuyers The new CMHC guidelines bring both opportunities and potential challenges for homebuyers, especially first-time buyers and those looking at new builds. The ability to spread out payments over 30 years, coupled with the increased price cap, may help younger buyers or those in high-priced markets better afford a home. Additionally, the flexibility to switch lenders without stress testing at renewal gives homeowners more options for managing their mortgage costs long-term. However, these updates also mean homebuyers must carefully consider their financial situation. A longer amortization period lowers monthly payments but also results in more interest paid over the life of the loan. Buyers should evaluate whether the short-term benefit of lower payments outweighs the long-term cost of higher interest. How to Navigate the New Rules With these changes, there are several steps you can take to make the most of the new CMHC guidelines: Explore New Build Options: If you’re a first-time buyer, consider purchasing a new build to take advantage of the extended 30-year amortization. Condos, in particular, can be a more affordable option with the potential for long-term growth. Look at Larger Homes: With the price cap for insured mortgages increasing to $1.5 million, you may have more flexibility to explore higher-priced properties, especially in markets where home prices are steadily rising. Compare Lender Offers: Take advantage of the new rule allowing insured mortgage holders to switch lenders at renewal without requalification. This opens up the opportunity to seek out more competitive rates, potentially saving you thousands of dollars in interest over the life of your mortgage. Final Thoughts: Planning for the Future As the real estate landscape evolves, staying informed about new regulations and mortgage guidelines is crucial. The recent changes to CMHC’s rules offer new opportunities for homebuyers but also require careful consideration of long-term financial planning. Working with a real estate professional or mortgage advisor can help you navigate these changes and develop a strategy that fits your unique needs. Disclaimer: The information provided in this blog post is for general informational purposes only and does not constitute personalized real estate, financial, or legal advice. Every individual's situation is unique, and the strategies or tips discussed may not be suitable for all circumstances. We recommend consulting with a real estate professional, accountant, or lawyer before implementing any approaches mentioned to ensure they align with your specific needs and circumstances.