Bank of Canada Announces Fifth Interest Rate Cut of 2024: What It Means for You

This morning, the Bank of Canada wrapped up its final interest rate meeting of 2024 with a decisive announcement: a 0.50% cut to the key interest rate. This marks the fifth rate cut of the year, a move that underscores significant economic challenges and opportunities for Canadians.

2024 Rate Cuts at a Glance:

• Five consecutive rate cuts since June

• Two back-to-back jumbo cuts of 0.50% each in November and December

• A total of 1.75% in rate reductions throughout 2024

These adjustments highlight the Bank’s aggressive approach to stimulating the economy in the face of rising unemployment and weak growth.

Why Did the Bank Cut Rates Again?

The decision to lower rates stems from several economic factors:

• Rising unemployment: Currently at 6.8%, reflecting challenges in the job market.

• Weak GDP growth: The economy grew by only 1.0% in Q3, well below expectations.

• Stable inflation: Holding steady at 2.0%, the Bank’s target level, signaling no immediate concerns about price instability.

What Does This Mean for You?

The Bank of Canada’s Prime rate will now begin 2025 at 5.45%, translating into lower costs for borrowers:

• Variable-rate mortgages: Likely to fall within the range of 4.45% to 4.90%, depending on the discount applied to Prime.

This is welcome news for homeowners and prospective buyers, as borrowing costs continue to ease.

Fixed-Rate Mortgages: A Sweet Spot on the Horizon

Looking ahead to 2025, further rate cuts are expected, although at a slower pace. Here’s what economists predict:

• Conservative estimates: A further 0.25% cut

• Optimistic forecasts: Up to 1.00% in total cuts

If you’ve been waiting for fixed rates to drop, the moment is approaching. One major bank is already offering fixed rates at 3.99% or lower for CMHC-insured mortgages (for buyers with less than a 20% down payment). By spring, experts anticipate the “sweet spot” for five-year fixed rates to fall within the 3.49% to 3.99% range.

Expert Insights

Economist Benjamin Tal of CIBC has noted:

“With inflation under control and the economy cooling, now is the time for homeowners to take advantage of historically low fixed rates, securing stability in an unpredictable market.”

How Danlee Group Can Help

At Danlee Group, we’re here to help you navigate these changes and make the most of the current economic climate. Whether you’re looking to refinance, secure a new mortgage, or simply understand how these rate cuts affect your financial strategy, our team is ready to assist.

Stay informed. Stay empowered. Reach out to us today to discuss your options.