Less than two weeks after buying a new home with a variable mortgage, Madison and Graham Fisk are feeling more confident thanks to yet another Bank of Canada interest rate cut.
The Keswick, Ont., couple says declining interest rates mean their dream of a bigger home for their daughter and dog is more financially feasible.
“We were able to take on that mortgage a whole lot better than what it’s been like for the last few years,” Graham Fisk said.
With the Bank of Canada announcing its fifth consecutive interest rate cut since June, homebuyers and industry experts say lower rates are likely to encourage more buyers to enter the market.
While they prefer a fixed rate mortgage, the Fisks said they’re considering signing a variable mortgage for their home because the Bank of Canada has signaled further cuts are on the horizon.
This latest cut brings the interest rates to 3.25 per cent. At this time last year, the rate was five per cent. And while more cuts are expected, the Bank of Canada signalled they may slow throughout next year.
“The more that they come down, the better for us it will be,” Madison said.
Meanwhile Hazem Madarati, who bought his Milton, Ont., home with his wife on a variable mortgage, is already thinking of what they might do with the extra money they’ll be saving.
After a rough few years in the Canadian economy, they say this gives them a chance to catch up with their finances.
“It’s giving us the opportunity to finally be able to save, whether that’s for future vacations or for other family plans that we have in the works,” he said.
2025 brings optimism, uncertainty
Although housing inventory is still low in the Greater Toronto Area, Samantha Villiard, regional vice president of RE/MAX Canada, says she’s seen an uptick in sales since the October rate cut.
Last month, the Toronto Regional Real Estate Board said home sales in the Greater Toronto Area were up 40 per cent compared to November 2023. The board reported new listings were up, but not enough to satisfy the demand in the market.
Villiard says the latest cuts are not a cure-all for those struggling to get into the GTA housing market.
“I’d be hesitant to say a game changer. I think it just adds more of a realistic opportunity,” she told CBC Toronto.
Jeremy Kronick from the C.D. Howe Institute, a non-partisan think-tank, said he hasn’t seen a big surge in housing demand from previous rate cuts.
But given this is the second large, 50-basis-point cut in a row, Kronick says things could change.
“It’s a pretty big movement, and it could certainly ignite some of those that have stayed on the sidelines waiting for this to happen,” he said.
The Bank of Canada has lowered its interest rate by 50 basis points to 3.25 per cent, but hinted it may pump the brakes on further deep cuts over concerns about inflation.
Many economists expect the central bank to get close to a “neutral” rate next year, somewhere around the 2.5 to three per cent mark.
But Kronick and Villard say the Canadian economy, as well as the housing market, could take a hit if U.S. president-elect Donald Trump follows through on his threat to implement 25 per cent tariffs.
“The big elephant in the room is what’s happening south of the border,” Kronick said.