Bank of Canada Update – Rate Cuts – December 11th

Clinton Wilkins joins Rob Snow on CityNews Everywhere to chat about the Bank of Canada cutting interest rates by 50 basis points. Clinton explains how the rate cut could increase demand by improving affordability.

Rob Snow
One of the reasons that we’re talking about housing again today is because of the Bank of Canada’s big rate announcement. It’s another jumbo rate cut, 50 basis points to the overnight rate to end the year. So, for homeowners, let’s talk about what this means for mortgages and other mortgage options right now with Clinton Wilkins of the Clinton Wilkins mortgage team, it’s great to hear from you.

Clinton Wilkins
Thanks for having me, Rob.

Rob Snow
What do you think of the news today?

Bank of Canada’s Rate Announcement and Its Impact on Mortgages

Clinton Wilkins
You know, I think it’s great news for homeowners. I think it’s great news for anyone who’s going to be getting a mortgage, or if any clients have a variable rate mortgage or a home equity line of credit, they’re going to see their cost of borrowing go down, which is very favourable. Great news in December. It’s a bit of a gift, I think, from the Bank of Canada. You know, borrowers that are in a variable rate mortgage product will see their payments go down, or their amortization get shorter. You know, I think it’s good news going into 2025.

Rob Snow
So what is this doing to the market right now, the demand for mortgage products right now? Clinton, what’s your experience and what are you expecting?

Popular Mortgage Options and Market Trends

Clinton Wilkins
The demand is not as high as it has been previously. I think in different markets across the country, Rob, you would see kind of different results. I know in Ontario and BC, it’s still very, very soft compared to previous years. The rates still being high. I think this is good news for anybody who’s looking to buy a home or even sell a home. I think there is going to be more demand. I think starting at the end of last year, we had a lot of people that were sitting on the sidelines, I think A) because the cost of borrowing was high and B) they couldn’t afford it. They couldn’t qualify. The stress test, with the rates being high, really limited the affordability, and that took a lot of the demand out of the market. So I think with these rates going down, obviously, it will positively impact clients qualifying as well. Clients will qualify for a higher mortgage now, with a variable rate mortgage product today than they would have yesterday. So I think that is good news. The one thing that we’re going to continue to watch is, you know, the Canadian dollar. We’re going to be watching the GDP and the employment numbers. You know, that’s going to impact the next rate announcement, which will be at the end of January. I’m keeping a close eye on what’s going on in the US political and economic situation. The US may not tie one to one what’s going on here in Canada, but it can have significant impacts, and that can impact the bank can decision that will happen here at the end of January.

Rob Snow
Okay, so what have been popular mortgage options for buyers or people renewing and how could today’s decision from the bank affect that?

Top Mortgage options going into 2025

Clinton Wilkins
I would say there was a big shift into a three-year fixed-rate product. I would say that’s the most popular product that any bank or mortgage professional would talk about kind of leading up to the last couple of months, there certainly has been a big shift into clients taking a variable rate mortgage product, primarily because there’s a lot of optimism. Borrowers continue to think that the bank can continue to soften the key overnight rate, and the variable will be, in fact, cheaper than a fixed rate. But the optimism is high that we’re going to continue seeing cuts in the future and into 2025 so I encourage any borrowers who are thinking about doing a mortgage to think about a variable there are some huge pros. If you were to break that variable mortgage early, you would pay a penalty of only three months of interest, which is great. And you can also convert any variable-rate mortgage product into a fixed rate. So there certainly are some big, big upsides. And for those borrowers that are in a fixed I think we need to remember if you’re exiting your term early, especially if you, if you had your variable or your fixed rate the last year or two, it’s been quite high. My big concern is, that anybody exiting a fixed rate early could see much higher penalties than they’ve been used to in the past.

Rob Snow
After today’s move from the central bank, what kind of rates are you expecting for the more popular mortgage products?

Future Outlook and Closing Remarks

Clinton Wilkins
I think any borrower that is going to be getting a variable rate, they are going to see anywhere in a prime minus point nine would be a very good rate. So, we’re going to be seeing rates in the low to mid-fours. I think that’s a great place to be. I would say the majority of mortgages, regardless of it being fixed or variable. We’ll start with a four right now. Here in 2024, I think going into 2025 I think a lot of borrowers and mortgage professionals are optimistic that we will start seeing rates start with a three, but that might be some time off yet right now.

Rob Snow
We shall speak to you in the new year when the Bank of Canada makes its next decision. I appreciate hearing from you again today. Enjoy the rest of your day, Clinton. Thank you.

Clinton Wilkins
Thanks, Rob. Have a great day and happy holidays.

Rob Snow
Thank you. That’s Clinton Wilkins of the Clinton Wilkins Mortgage Team. I’m Rob Snow. This is now his talk here on News Radio.