While everything points to a reduction in the key rate as of Wednesday, banks are already offering promotional fixed mortgage rates below standard rates.
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In an interview with LCN, financial planner Fabien Major estimates that the Bank of Canada will announce on July 5 a first cut in the key rate of 0.25% and a second of the same magnitude on July 24.
“We could start the second half of 2024 with a rate of 4.5%, which will give some relief to families already stuck financially since the summer of 2022 due to high inflation,” he maintains.
The one who is also a wealth management advisor has analyzed several promotional rates offered by banks and is of the opinion that they are also preparing for an imminent drop.
“It really seems like the banks are waiting for a drop, since we find rates that are well below the standard posted rate of 6.84% for the five-year closed mortgage,” he said. We now find a little bit above 5%, which is actually very good news.”
According to him, everything is in place for a first drop.
“All the data shows that inflation is under control and that we are within the Bank of Canada’s target of between 1 and 3%,” says Mr. Major. Also, the Canadian economy is slowing down from quarter to quarter and unemployment is also increasing.”
“0.25% is a small adjustment, and I think that for the next few months, the Bank of Canada will be able to observe what happens and on July 24, if it ever decides that we can apply a second reduction, she will move forward,” he adds.
Mr. Major advises people who need to renew their mortgage soon to look at a variable rate.
“It is clear that the [taux] “variable is even more interesting at the moment since we are about to witness the first rate cuts and if we have a variable rate, it will impact interest payments,” he maintains.
Watch the full interview in the video above
