On December 11, 2024, the Bank of Canada (BoC) cut its overnight rate by 0.50%, bringing it down to 3.25%. This shift will affect the housing market, mortgages, and the broader economy—particularly for those looking to buy or refinance. Let’s dive into what this rate cut means for you.
What Does the Rate Cut Mean for Homebuyers?
The BoC’s move is designed to help manage inflation and stabilize the economy. If you’re thinking about a variable-rate mortgage or a Home Equity Line of Credit (HELOC), this cut means lower interest rates and potentially reduced monthly payments. For those with a variable-rate mortgage, your payments could go down, making home financing more affordable.
HELOCs will also see a drop in interest rates, which could benefit homeowners using them for things like renovations or debt consolidation.
Fixed-Rate Mortgages: Not Directly Impacted
While the rate cut doesn’t affect fixed-rate mortgages directly, it could still have an indirect impact. Fixed rates are tied to bond yields, not the overnight rate. However, as variable-rate mortgages become more competitive, many buyers may find them more appealing. The best 5-year insured fixed-rate mortgage is currently at 4.14%, after today's rate cuts, the lowest variable rates will be around 4.50%.
Victoria’s Strong Job Market: A Bright Spot in a Slower Economy
While Canada faces economic challenges, Victoria remains resilient with an unemployment rate of just 3.7%, well below the national average of 6.8%. Victoria’s strong job sectors, particularly in government and technology, provide a stable foundation for the local economy and real estate market.
This economic stability means potential buyers in Victoria are more confident in making long-term investments, even when national trends are slower.
How This Affects Victoria’s Housing Market
Victoria’s strong job market positions it well compared to other regions in Canada. With the BoC’s rate cut making mortgages more affordable, the Victoria housing market continues to thrive, driven by a demand for stable, long-term housing solutions. Now could be the perfect time for buyers to enter the market.
What’s Next for Mortgage Rates?
The overnight rate may continue to decrease, making variable-rate mortgages even more competitive with fixed-rate options. This could help more buyers secure affordable financing in the coming months.
Conclusion: A Good Time to Buy in Victoria
The BoC’s recent rate cut makes homeownership more affordable, especially for those considering variable-rate mortgages. Combined with Victoria’s resilient economy, it’s a great time for buyers, investors, and those looking to refinance. If you're considering entering the Victoria real estate market, now’s the time to take action.