Interest Rate Announcement July 2024

If you’ve been following the Bank of Canada’s interest rate changes, you’ll know that the key rates have been reduced to 4.5%, another significant decrease since the rates went to 4.75% in June.

The reductions are welcome signs that inflation is finally beginning to cool down, with the new interest rate being a positive step forward.

In this post, we’ll explore what the interest rate reduction means for consumers and mortgage rates.

Bank of Canada Decreases Interest Rate to 4.5%

On July 24th, 2024, the Bank of Canada announced a 25 basis point reduction, making the new interest rate 4.5%.

While inflation is still above the BoC’s target of 2%, many people see the reduction as a positive sign that the economy continues to stabilize.

However, officials were quick to underscore the potential hurdles, such as reductions in household spending and ongoing global geopolitical tensions, which could complicate the situation.

The bank warned that a continued decrease in inflation might not be smooth, and rates could increase if the country experiences economic difficulties.

Benefits of Interest Rate Decreases for Mortgages in Canada

Finding a mortgage in Canada can be challenging, with high amounts of buyers and limited properties. The BC government is mitigating these issues by building new properties and making homeownership more affordable for first-time homebuyers, including prioritizing incentives like the $40,000 secondary suite initiative to increase home values, and provide revenue streams for homeowners.

Lower interest rates mostly have positive implications for people in Canada, with the benefits including:

Lower Monthly Payments: People on variable-rate mortgages can look forward to lower monthly payments, simplifying financial management.
Accelerated Payoffs: All mortgage types benefit from interest rate reductions, and many homeowners can clear their debts. Each mortgage payment contributes more to the principal than interest, resulting in faster payoffs.
Affordability: Lower interest rates enhance affordability for prospective buyers, increasing housing demands. The changes could also boost the Canadian economy.
Refining Opportunities: Many homeowners explore mortgage refinancing options when interest rates fall, as there are better deals that can reduce monthly repayments.

How Lower Interest Rates Affect Mortgage Renewals

Lower interest rates can be beneficial for both prospective and current homeowners. Mortgage renewals are often a major source of stress in Canada, but a 4.5% interest rate can open up a range of opportunities.

Increasing Payments Towards Your Principal Balance

When interest rates decrease, you can direct a larger portion of your repayments towards the principal balance.

High rates mean many people are stuck with interest payments, limiting their ability to build equity and reduce the total amount of interest paid over the life of the loan.

Locking In A Term With Better Rates

Renewing your mortgage when the interest rates are low means you can lock in better terms. Opting for a fixed mortgage gives you stability, as the rates will remain the same throughout the duration.

Not only does this mean lower monthly repayments, but it also frees up your finances for other investments or expenses.

Relief For Variable Rate Mortgages

Reduced interest rates will directly benefit homeowners with variable-rate mortgages because the Bank of Canada’s base interest rate defines how much people pay.

Lower payments can enhance your cash flow, making it easier to juggle other financial commitments. If you’re planning to renew your mortgage, shopping around now could give you access to excellent deals.

2024 Interest Rate Predictions for Canada

Earlier this year, we predicted that interest rates in Canada would decrease by June—and we were right.

As of July 2024, experts predict a continued decrease in interest rates, a trend expected to significantly impact the Canadian economy.

This year’s two rate cuts highlight a distinctive shift in the Bank of Canada’s monetary policies, and experts believe the inflation rates will fall below the 2% target.

However, we need to understand the factors that might impact future interest rates, including:

Inflation: If inflation continues to fall, interest rates will decrease. As with the rest of the world, Canada is recovering from the effects of COVID-19, and the economy is stabilizing.
Economic Growth: The Canadian economy’s overall health affects interest rate changes. Downturns will inevitably cause significant increases.
Global Economic Conditions: International factors, including recessions, ongoing geopolitical tensions and other global influences, can impact domestic interest rates.

Despite the positive changes, it’s vital to understand that no prediction is set in stone. Experts anticipate further rate cuts, but there’s no set time for this.

Understanding the potential implications of interest rate increases means you can cautiously approach mortgage applications and renewals.

Book A Consultation To Learn About Renewing Your Mortgage In Victoria

If you’d like to renew your mortgage and access the best rates, our mortgage brokers can help. We have a vast network of experienced lenders who work with people from all backgrounds.

Whether you want lower payments or fixed interest rates, starting your mortgage renewal application with us opens up a world of opportunities.

Please don’t hesitate to contact us if you have any questions.