Bank of Canada Update: September 17th

Clinton Wilkins discussed the Bank of Canada’s recent decision to reduce its key interest rate by 25 basis points, which is expected to lower mortgage rates.

Dan Ahlstrand
Before we get to the phones, let’s welcome Clinton Wilkins to the show today. Mr. Wilkins, how are you, sir?

Clinton Wilkins
Thanks for having me, Dan. I’m doing great.

Dan Ahlstrand
Listening to Mortgage 101 on the weekend, because, well, I was the special guest of our host for that, and you boldly made the prediction that the Bank of Canada was going to drop its key interest rates by 25 basis points and they did.

Clinton Wilkins
I’m not falling on my sword today. Dan, so it’s great news to be able to report. I think for homeowners, obviously good news. Reducing the cost of borrowing is very positive. You know, I think really the reason the bank’s ganda reduced this key rate, and economists were really waiting with bated breath for this announcement today. The job numbers and inflation are below target, even when we take into consideration things like the carbon tax and just the general state of the economy. We’re now in a situation where we can start spending some more. I think we can be cautious, cautiously optimistic. I did host a webinar with a senior economist from the Bank of Montreal earlier this week for the industry in Nova Scotia and in New Brunswick, and they’re projecting that we’re going to see the key rate down 75 basis points by the first of January. So I think we’re going to see a few more cuts here along the way.

Dan Ahlstrand
So this is just the beginning, right?

Clinton Wilkins
This is just the beginning. And I think we can be cautiously optimistic that many mortgage rates will start to rise. I think optically, Dan, it’s motivating for existing homeowners who have their mortgage coming up for renewal. It’s great news if you want to refinance, or if you’re looking to buy a new home, having the cost of borrowing being less enables you to have more dollars in your pocket monthly to pay for things like food and gas, which still is, you know, we’ve suffered from the inflation, but now we’re basically in the new normal.

Dan Ahlstrand
Clinton, et’s say they have a variable rate, a 25 basis point drop. Like, are we talking 10s of dollars? Are we talking hundreds of dollars a year? What kind of savings does this create?

Clinton Wilkins
Well, anybody who has a variable rate mortgage, depending on how their mortgage is set up, either their payments are going to start going down, or their amortization is getting shorter, right? The actual monthly savings are really based on how much they owe and what their amortization is. So I can’t tell you dollar-wise how much people are going to save. 25 basis points is not a lot, but for some people, that can be 1000s of dollars a year, depending on what they owe.

Dan Ahlstrand
You and I were talking about this on the weekend Clinton you suggested, and I think it kind of makes sense that with the Bank of Canada doing what they did today, and the potential of them doing it two more times, that those that have been kind of on the sidelines and watching and waiting, this may motivate them to to pull the trigger on a deal.

Clinton Wilkins
I think it certainly will, especially knowing that we’re going to continue to see some cuts here. Hopefully, in the future, the Bank of Canada will reduce the key rate in six months. March was the last time we had a cut down, so we’re back now on this reduction. And typically, what happens when the Bank of Canada starts reducing the rate, they’ll continue reducing the rate. Some are cautiously optimistic that, you know, the economists are right. But again, anything can change tomorrow. Things that are going on in the US, things that are going on in our economy. Many factors come into these Bank of Canada decisions, and really, the governor of the Bank of Canada doesn’t know until today what’s going on. Yes, it was highly speculated this week that we’re going to start seeing a reduction, but push comes to shove. They really don’t know until this announcement is put out.

Dan Ahlstrand
Do the banks follow this? Do you think that all the major lenders are going to follow this, this reduction, or are they going to do their own thing?

Clinton Wilkins
The banks will follow, so most banks’ prime will be 4.7% some will update it immediately. Dan, so within the next, you know, 24 hours, other lenders will update it for the first of October. It just depends. You kno, what the lender’s policy is?

Dan Ahlstrand
Clinton, very quickly, a peek into the market. What’s it look like out there right now? Is, where are we at? Buyers, sellers, wise, and is there? Is there inventory available?

Clinton Wilkins
Certainly lots of inventory. We’re seeing more and more listings come up, and we’re more in a balanced market today than we were before. From a real estate perspective, I’m not a realtor, but I’m a professional looking from the outside in and I can tell you that there are certainly transactions happening. From a purchase perspective, I would say there werefewers purchases happening here in 2025 than we saw maybe in previous years. But having a more balanced market, I think, is good for everyone. There was just too much stress and strain on the market, including from our side of things. It’s tough when we’re under this much pressure to be able to do these transactions. Having it be more balanced, I think, is good. For everyone. And I can tell you, there certainly are a lot of buyers out there with pre-approval. So I expect we’re going to see some offers and a very busy fall going into the end of the year.

Dan Ahlstrand
That is Clinton Wilkins. He’s our mortgage expert. A quarter 25 percent reduction in the prime lending rate, down to two and a half percent, that hat announced just a couple of hours ago, and Clinton says that it is only the very beginning.