Bank of Canada Interest Rate Update - December 2024
The Bank of Canada (BoC) met on Dec 11th, and made the decision to DROP RATES BY ANOTHER 0.50%. A welcome relief for all of us variable rate mortgage borrowers, and fingers crossed for more good news to come over the coming months.
To read the official Dec 11th BoC announcement, please click HERE
As previously discussed, with Trump winning the U.S. election, and his proposed policy updates, we may be coming into an interesting period where fixed rates rise while variable rates in Canada continue to drop. And it is likely that we are now very close to the bottom of where fixed rates will go for this rate cycle. Although, of course, anything can happen, but this is the prediction today. Trump takes over power in the U.S. on January 20, 2025, we will see what happens from there. However, it is something to start thinking about now if you are planning to lock-in to a fixed rate.
The path for BoC rate cuts is still conservatively pricing in another 0.50% in rate cuts by Spring 2025 before leveling out. However, there is the potential for a larger number of rate cuts depending on the state of our domestic economy. Only time will tell how this all plays out.
It is important to note that the markets (which help guide the fixed rates in Canada) have already priced in the anticipated BoC rate cuts to come. Which means that when those BoC rate cuts materialize in the future, we don't expect to see fixed rates drop much more than where they are today. Given all this new information, now may be the time to lock-in to a fixed rate mortgage, if this is something you have been waiting on. There is a lot of uncertainty in both our domestic economy, and especially in the U.S. right now, which is making it difficult to predict exactly what will happen with fixed rates in the future, however it is possible that we see them rise depending on how things play out over the coming months.
With that being said, if you are comfortable with the risks of the variable rate product and are not planning to lock-in, then staying variable may also have its benefits, especially if rates drop more than the 0.50% still expected. I am personally going to stay variable for the time being, however that may change over the next few months depending on what fixed rate lock-in options become available to me. And I will, of course, keep you posted on that!
My top recommendation continues to be that we must ensure your financial house is in order so that you are better able to weather this storm, and I am here to help you through this. Please do not wait to reach out to me until it’s too late. If you have any high interest debt or are struggling with your payments, now may be the time to renegotiate your mortgage and lock-in to a lower fixed rate to help reduce your overall household expenses.
Also, if you are currently in a fixed rate or a variable rate mortgage at 5% or higher, now is the time to call me and look into some interest savings tactics!! We have already helped multiple clients save tens of thousands of dollars by switching to a lower rate!
What does this rate announcement mean for you?
Adjustable rate mortgage holders: Will see a reduction in your payment by $28 for every $100,000 in mortgage funds, depending on your rate, amortization, etc.
Fixed rate mortgage holders: No changes
If you are in a "fixed payment - variable interest" product...No changes to your payments - but thankfully you are starting to pay a little less interest
If you have questions about your “fixed payment - variable interest” product, like dropping your payments now that rates are starting to come down, or what happens at renewal, please reach out to me so that I can explain your specific situation and my recommendations for what to do.
Should I lock-in my variable rate now?
If locking-in to a fixed rate is something you are considering, let's talk. Now may be the time to look into this if you are wanting the lower payment today, and comfort of a fixed rate.
Some of our lowest fixed rate options available today:
1 year @ 6.04%
2 year @ 5.14%
3 year @ 4.19%
4 year @ 4.39%
5 year @ 3.99%
*Conditions apply
I want to lock-in to a fixed rate, what do I do now?
Contact your lender directly and ask them what rate they will offer you to lock-in. Request all terms available to you, including 3, 4 and 5 year rates (if possible). Once you have that information please send it to me and I will help you with a strategy.
Our team is here to support you through this, so please don't hesitate to reach out if you have any questions or concerns.
