December 11, 2024 the Bank of Canada announced another 50-basis-point rate cut, bringing the policy rate down to 3.25%. This move, which marks the fifth consecutive rate cut this year, offers significant relief for borrowers, particularly those with variable-rate mortgages and home equity lines of credit (HELOCs).
For most mortgage lenders, this reduction translates to a prime rate of 5.45%. If you’re currently navigating the housing market or managing an existing mortgage, here’s how today’s news could impact you.
What the Rate Cut Means for Homeowners
If you have a variable-rate mortgage, you’ll likely see an immediate reduction in your monthly payments. For example:
- A 50-basis-point cut reduces monthly mortgage payments by approximately $28 for every $100,000 of debt, assuming a 25-year amortization.
- For a $1,000,000 mortgage, this equates to monthly savings of around $280.
Similarly, HELOC borrowers will benefit from lower interest costs, making it a bit easier to manage household budgets or fund renovations.
Opportunities for Buyers
Lower rates make borrowing more affordable, which could improve your purchasing power as a homebuyer. With reduced monthly payments, it may be possible to qualify for a higher mortgage amount or stretch your budget to secure a dream home.
However, it’s also worth noting that lower rates can increase demand for homes, potentially driving up prices in competitive markets. Buyers should act strategically and work closely with a knowledgeable real estate team to navigate the evolving landscape.
What Should You Do Next?
If you’re a homeowner, this is a great time to reassess your financial situation:
- Consider increasing your mortgage payments to reduce your principal faster while rates are low.
- Reevaluate your HELOC strategy to take advantage of lower borrowing costs.
If you’re considering entering the housing market, reach out to our team to explore your options. Whether you’re buying or selling, a clear understanding of how rate changes affect the market will ensure you make informed decisions.
Stay Ahead of Market Trends
Navigating the real estate market can be complex, especially during times of economic fluctuation. As experts in the Milton real estate market, our team is here to guide you every step of the way. Contact us today to discuss how this rate cut could influence your plans, and let’s work together to achieve your real estate goals.
Need personalized advice? Call us or visit our office in Milton to get started!
Written by:
Tanya Fernandes
Owner | Broker
