The Bank of Canada (BoC) recently announced a 25 basis point reduction in its policy rate, bringing it down to 3%. This move is part of an ongoing effort to support economic growth while maintaining price stability. But what does this mean for Canadians, especially homebuyers? In this blog, we’ll break down the reasons behind the rate cut, its impact on the economy and mortgage rates, and how Cedarbrook’s latest homebuyer incentives make now the perfect time to invest in a new home.
The BoC decided to lower its rate due to inflation hovering around 2% and an economy with excess supply. Since June 2024, the Bank has been in a rate-cutting cycle to stimulate economic activity. Lower interest rates encourage borrowing and spending, helping to strengthen the economy over time.
Despite global uncertainties, Canada’s economy is expected to grow by 1.8% in both 2025 and 2026. Factors influencing this outlook include:
While these trends are encouraging, slower population growth due to reduced immigration targets may moderate economic expansion.
The Bank of Canada expects inflation to stay near 2% over the next two years. Factors impacting inflation include:
With inflation under control, the BoC has room to continue adjusting rates to support the economy.
If you have a variable-rate mortgage, this rate cut means that more of your monthly payment will go toward paying down the principal rather than interest. This could result in lower overall interest costs over time.
For those with fixed-rate mortgages, the impact is less immediate. Fixed rates are influenced by bond yields, which have fluctuated in recent months. However, if the BoC continues to cut rates in 2025, fixed mortgage rates could trend lower in the future, making refinancing a more attractive option.
One major factor influencing future rate decisions is the potential for U.S. tariffs. If the U.S. imposes broad tariffs on Canadian exports, the BoC may be forced to accelerate rate cuts to cushion the economy.
TD Economics predicts the BoC will cut rates by another 100 basis points by the end of 2025, potentially bringing the lending rate down to 2%. However, the pace of cuts will depend on economic data, inflation trends, and external risks.
Lower interest rates reduce borrowing costs, making it cheaper to finance big-ticket items like homes and cars. This is particularly good news for homebuyers, as mortgage rates often decline when the BoC lowers its policy rate.
The recent rate cut by the Bank of Canada presents an excellent opportunity for homebuyers, as it translates to meaningful savings on mortgage payments. For example, purchasing a $650,000 Cedarbrook Townhome with a 10% down payment would result in a mortgage of $585,000. Before the rate cut, with an interest rate of 3.25%, the monthly payment would have been approximately $2,847. However, with the new lower rate of 3.0%, the monthly payment decreases to about $2,773, leading to a monthly savings of $74. Over the course of a year, this amounts to $888, and over a 5-year term, the total savings reach $4,440.
For buyers who opt for a 25% down payment, the mortgage amount would be $487,500. Under the previous 3.25% rate, the monthly payment was approximately $2,375, but with the new 3.0% rate, the monthly payment decreases to $2,316. This results in a monthly savings of $59, translating to $708 annually and a total savings of $3,540 over five years.
The savings are even more substantial for those looking to purchase a Cedarbrook Trail home, priced at $1,025,000. With a 10% down payment, the mortgage amount would be $922,500. Before the rate cut, the monthly mortgage payment would have been higher, but with the new 3.0% interest rate, buyers can expect to save approximately $121 per month, adding up to $7,254 in savings over five years. For those making a 25% down payment, the monthly mortgage payment would decrease by about $101, leading to a total savings of approximately $6,044 over five years. This means significant financial benefits for buyers who act now while rates remain favourable.
On top of potential mortgage savings, Cedarbrook is offering exclusive homebuyer incentives:
With interest rates declining and Cedarbrook’s unbeatable incentives, now is the ideal time to invest in your dream home. Contact our Sales team to take advantage of lower borrowing costs, thousands in mortgage savings, and learn more about our limited-time offers before they expire!
