Today’s Bank of Canada’s 50-basis-point rate cut will decrease Canada’s prime rate to 5.45%. This adjustment means lower variable mortgage and line of credit rates, providing relief to some homeowners facing higher borrowing costs.

Some variable rate borrowers have payments that change with changes to the prime rate, as payments for line of credit borrowers do.  Fixed rates for new mortgages often trend in the same direction as variable rates but not in lock-step.  No changes occur for current fixed rate mortgage holders.

The Bank has indicated it’s adopting a more cautious approach, with 25-bps cuts and possibly a pause. Market projections reflect this sentiment, with the OIS market forecasting just two more rate cuts by mid-2025. For the upcoming Bank of Canada meeting on January 29, the market forecasts a 56% chance of another 25-bps cut and a 44% chance of no change.

The economic backdrop is mixed. While reduced immigration targets are expected to slow GDP growth by 2025, the impact on inflation may be limited. Meanwhile, U.S. inflation remains stubborn, with core inflation rising to 2.7% year-over-year. This inflationary pressure could constrain both Canadian and U.S. central banks in rate-cutting.

The nature of forecasts is one of change, highlighting the importance of strategic mortgage planning. Whether considering a purchase, refinancing, or reviewing your current rate, reach out any time.  I’d be pleased to discuss your particular situation and how you might make the most of the options available to you.  My number is above and I’m always happy to help.

Adapted from MortgageLogic.news

Image Credit: Ussama Azam, Unsplash