Bank of Canada Cuts Rates: Your July 2024 Financial Update
As we reach the peak of summer, I hope this newsletter finds you well and enjoying the season. I apologize for the slight delay in getting this out to you – with school being out, I’ve been savoring precious family time and soaking in the warm weather. We’ve spent July on the Gulf Islands at our property, making memories that will last a lifetime. I hope you’ve had some equally memorable moments and that they continue flowing through August!
Breaking News: Bank of Canada Rate Cut
July 2024 Bank of Canada Rate updated via Catherine Ellis
The Bank of Canada has cut the policy rate by 0.25% this morning. This change has immediate implications for those holding variable rate products. Here’s what it means for you:
Impact on Variable Rate Products:
HELOC: For every $100,000 borrowed, your payment will decrease by approximately $20.83
Mortgage: For every $100,000 in mortgage, your monthly payments will reduce by about $15.00
Examples of Monthly Payment Reductions:
$250,000 mortgage = $37.50 reduction
$500,000 mortgage = $75.00 reduction
$750,000 mortgage = $112.50 reduction
Note: The timing of these changes may vary depending on your lender. Some will implement changes immediately, while others may wait until the 1st of the following month. For fixed payment variable rate mortgages (VRM), your payment will remain constant, but the proportion applied to principal vs. interest will adjust based on the new rate.
Economic Outlook:
The Canadian economy is showing signs of gradual recovery:
The economy grew by 1.5% in the first half of 2024.
Population growth remains strong at 3%, outpacing GDP growth.
Household spending has been weak for both housing and consumer purchases.
The labor market shows some slack, with unemployment rising to 6.4%.
Wage growth is moderating, and job seekers are taking longer to find employment.
Looking Ahead:
GDP growth is forecast to increase in the second half of 2024 and through 2025.
We anticipate stronger exports and a recovery in household spending and business investment.
Residential investment is expected to grow robustly.
New government limitations on non-permanent residents may slow population growth in 2025.
Projected GDP growth: 1.2% in 2024, 2.1% in 2025, 2.4% in 2026.
CPI & Interest Rates Update
Great news for the Canadian housing market! CPI has fallen, and without mortgage interest, we’re seeing spring 2021 numbers around 1.4%. Bond yields have also dropped recently, creating an environment of declining rates. This brings several benefits:
Future Buyers: Lower qualifying rates mean increased borrowing potential.
Investors: More profitable returns and opportunities.Upcoming Renewals: Reduced impact on cash flow.
Variable Mortgage Holders: Predicted rate decreases by top economists in Canada and the US.
This positive shift suggests more stability and normalcy ahead, helping us recover from the challenges of the past three years. Stay tuned for more updates and insights!
The impact of mortgage interest on Consumer Price Index:
Bonds Trending Down – what this means for renewals, potential moves & penalties:
June 2024 Housing Market Summary:
National Statistics (Source: CREA)
Home sales increased by 3.7% month-over-month in June.
Monthly activity is 9.4% lower than June 2023 (not seasonally adjusted).
New listings rose by 1.5% month-over-month.
The MLS® Home Price Index (HPI) is up 0.1% month-over-month, but down 3.4% year-over-year.
The average sale price decreased by 1.6% year-over-year to $696,179.
British Columbia Statistics (Source: BCREA)
Sales activity is softer than June 2023, which was the market peak.
Year-to-date residential sales dollar volume is down 2% to $38.6 billion.
Residential unit sales decreased by 4.1% year-over-year to 38,639 units.
The average MLS® residential price increased by 2.3% to $997,883.
Despite softer year-over-year performance, both national and provincial markets show gradual improvements month-over-month, indicating balanced conditions and potential stabilization following recent rate changes.
Did You Know? Maximizing Mortgage Qualifications
Here’s a valuable tip: Lenders allow you to use up to 100% of rental income from a suite to assist with mortgage qualifications. This can significantly boost your borrowing power:
Excluding taxes and heat, this could give you access to an additional $100,000 – $150,000 in mortgage qualifications.
Some lenders even allow us to utilize future suite income by incorporating renovation costs into the mortgage.
If you’re interested in learning more about this strategy, please don’t hesitate to reach out!
The financial landscape in Canada and worldwide continues to evolve rapidly. Many of you have mortgage renewals on the horizon and have been impacted by the volatile climate we’ve witnessed in Canada over these last few years. Please know that we are here to help.
I’m always available for a call, email, or zoom meeting to discuss the solutions and options available to you. If you have further questions that might require some extra attention, here is a link to my scheduler.
I hope you enjoy the rest of this beautiful summer!
Warm regards,
Catherine & the Cultivate + Evolve Financial Team
