Bank of Canada’s 50 Basis Point Rate Cut Brings Hope to Homeowners and Buyers

On December 11th, the Bank of Canada delivered its fifth rate cut of the year, lowering the overnight rate by 50 basis points to 3.25%. This jumbo cut caps off a series of reductions aimed at combating rising unemployment and a sluggish economy.

Homeowners with variable-rate mortgages or HELOCs are likely to feel immediate relief as borrowing costs drop. However, economists caution against expecting a smooth recovery, citing global uncertainties and domestic economic challenges.

Could more rate cuts be on the horizon for 2025? Early indicators suggest we may see additional reductions as the Bank works to stabilize the economy.

Key takeaway: Mortgage holders may benefit from lower payments, but staying informed on economic shifts remains crucial.

Fixed Mortgage Rates: Why They Might Not Follow the Bank of Canada’s Lead

While variable rates track the Bank of Canada’s overnight rate, fixed mortgage rates tell a different story. These are driven by bond yields, which remain stubbornly high.

Economists predict that despite the central bank’s recent rate cuts, fixed mortgage rates are unlikely to fall significantly. Don Drummond, a former TD economist, suggests that today’s fixed rates may persist well into 2025, sitting between 4% and 4.5%.

For borrowers, this means careful consideration of mortgage terms and options is critical as market conditions evolve.

Auto Loans: The Hidden Barrier to Mortgage Affordability

A new report reveals a surprising obstacle for many prospective homebuyers: auto loans. On average, Canadians spend $1,427 per month on car-related costs, which can significantly reduce mortgage affordability.

For some buyers, high auto debt has entirely disqualified them from purchasing a home. Mortgage brokers are urging clients to carefully evaluate their financial priorities, balancing the dream of homeownership with the costs of vehicle ownership.

Did you know? In Newfoundland, auto expenses exceed average mortgage payments, while in Vancouver, they’re just 27%—a stark contrast highlighting regional affordability challenges.