The Bank of Canada has been making headlines this year with a series of interest rate cuts, the most recent being a significant half-percent reduction. As a homebuyer, these changes could be a game-changer for your affordability and purchasing power.

Hi, I’m Lisa Salt with RE/MAX Vernon and Salt Fowler. Today, let’s explore how these 2024 interest rate cuts are making homeownership more attainable than ever.

2024: A Year of Interest Rate Reductions

The Bank of Canada kicked off its rate-cutting spree in June 2024, when the overnight lending rate stood at 5%. Since then, it has announced a total of four reductions, with the latest being a notable 0.5% cut in October.

Here’s the breakdown of this year’s rate reductions:

• June 5th: 0.25% cut
• July 24th: 0.25% cut
• September 4th: 0.25% cut
• October 23rd: 0.5% cut

We may see one more reduction before the year ends on December 11th, and economists are speculating another cut could happen in early 2025.

Why Do Interest Rate Cuts Matter?

When the Bank of Canada reduces its overnight lending rate, it lowers the interest rates on financial products offered by banks, including mortgages.

• Higher rates = More expensive borrowing.
• Lower rates = Cheaper borrowing.

For homebuyers, this means reduced monthly payments or increased borrowing capacity, making your dream home more affordable.

Savings Breakdown

For every 0.25% reduction, homeowners save approximately $15 per month per $100,000 borrowed. While that might not seem like much at first glance, the cumulative effect of this year’s rate cuts is substantial:

• A $500,000 mortgage saves $75 monthly.
• A $1 million mortgage saves $150 monthly.

Now, let’s factor in all four cuts in 2024:

• June: $15 per $100,000
• July: Another $15 per $100,000
• September: Yet another $15 per $100,000
• October: A 0.5% cut doubling the savings to $30 per $100,000

By now, those with variable-rate mortgages are saving $75 per $100,000 borrowed, translating to:

• $375/month for a $500,000 mortgage
• $750/month for a $1 million mortgage

What If You Already Have a Mortgage?

If you’re locked into a variable-rate mortgage, the savings likely go toward paying off the principal faster rather than reducing your monthly payments. This helps you pay down your mortgage sooner—a major win!

What If You’re Still House Hunting?

Reduced rates significantly increase your purchasing power. Here’s how:

• For every $100,000 borrowed, you typically need about $500/month in mortgage payments.
• If you’re saving $375/month, you could qualify for approximately $75,000 more in financing.
• If your savings are $750/month, that number jumps to $150,000 more.

Predictions for the Coming Months

Economists anticipate further rate cuts, possibly in December and January. While this could boost your purchasing power even more, keep in mind that lower rates often lead to increased demand for homes, potentially driving up prices.

When Is the Best Time to Buy?

Timing the market for the lowest interest rates and home prices is nearly impossible. However, with rates already 1.25% lower than in June 2024, now is an excellent time to take advantage of both affordability and increased buying power.

Don’t Miss Out

The current market presents a unique opportunity to capitalize on favorable interest rates and steady home prices. But waiting too long could mean missing out on these savings as home prices begin to climb.

If you’re ready to explore your options or need personalized advice, reach out today. Remember— Just Add Salt for expert guidance in the real estate market!

For more insights, check out our next blog, Mastering the Real Estate Market: Why Savvy Buyers Act Now.

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About the Author: The article above, Bank of Canada Cuts Interest Rates: What It Means for Homebuyers in 2024, was provided by Lisa Salt, an authority on Vernon BC and area real estate and a leader in the field of real estate blogging and vlogging.  Lisa and her group have helped literally helped thousands of families buy and sell homes since 1993. 

Looking to buy a home in the Vernon/North Okanagan area?  Check out "Everything You Need to Know About Buying a Home" article. It’s free of charge and will save you a ton of time!

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We help people buy and sell real estate in the following Okanagan/Shuswap areas: Vernon, Armstrong, Enderby, Lake Country, Lumby, Westside and Salmon Arm/Shuswap.

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