Drop in interest rate may lighten the load in Canadians’ pocketbooks and mortgages

Drop in interest rate may lighten the load in Canadians' pocketbooks and mortgages

For the first time since March of 2020, interest rates are coming down after the Bank of Canada cut its key rate by a quarter point to 4.75 per cent, and the impact is going to be felt in the pocketbooks and mortgages of Canadians.

Winster Court in Langford is still under construction, but once complete the six-storey 68-condominium complex is expected to sell quickly.

Realtor Scott Faber says the development is currently 25 per cent sold and it’s the type of development that appeals to first time home buyers.

“Our one-bedroom condos start at $429,900. Then our two bedrooms start at $524,900. Even with these low, and attractive price points, we still have a lot of people struggling to get that financing across the board, and approved,” Faber said.

A change in the Bank of Canada rate was the news many Canadians have hoped to hear.

It came Wednesday morning from the Governor of the Bank of Canada, Tiff Macklem.

“Monetary policy no longer needs to be as restrictive. In other words, it’s appropriate to lower our policy interest rate,” Macklem said from Ottawa Wednesday morning.

READ PREVIOUS: Bank of Canada cuts key interest rate for first time in more than four years

Wednesday’s Bank of Canada interest rate drop of 0.25 per cent may fuel sales. Faber says he expects even slightly lower rates will pique the interest of first time buyers.

“There’s a lot people sitting on the fence, kind of waiting for that confidence. I think a lot of buyers want to see that first rate drop happen, so they know some more could come down in the future,” Faber said.

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For homeowners like Joseph Hopkinson it’s been a tough few years. When interest rates spiked so did his variable rate mortgage payments costing him an extra $2,000 a month.

“It’s a struggle. I mean, obviously no one accounts for that kind of budgetary hole,” Hopkinson said from his home in Toronto.

He says the small change in interest rates is a big deal.

“One rate cut for our family would be approximately $142, which is about a week of groceries for our family of four,” Hopkinson said.

Mortgage broker Kam Brar says while variable mortgage holders will see some immediate relief, it will take time before there’s a change to fixed term mortgages.

“I think now with the overnight lending rate dropping, obviously that is a step in the right direction. We know that folks have been really struggling with the cost of goods,” Brar said.

Some economists are betting another interest rate cut will come in July, leading to possibly more fuel for the real estate market, and more relief for those with variable rates.

WATCH: ‘It’s a great time right now’: Home listings surpass 3,000 for the first time in Greater Victoria since 2019

Mary GriffinMary Griffin

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