Good News for Borrowers: Policy Rate Drops to 3¼%!

The Bank of Canada has taken another significant step to support the economy by reducing its target for the overnight rate to 3.25%. This marks the latest in a series of adjustments as the Bank continues its policy of balance sheet normalization amidst ongoing economic challenges.

A Snapshot of the Global and Canadian Economy

Globally, economic trends are aligning with projections from the Bank’s October Monetary Policy Report (MPR):

• United States: Strength in consumer spending and a solid labor market persist, but inflationary pressures remain.
• Europe: Growth has weakened, reflecting broader global uncertainties.
• China: Policies and strong exports are supporting growth, though domestic household spending remains subdued.
• Canada: While the economy grew by 1% in Q3, this fell below expectations. Business investment and exports slowed, but consumer spending and housing activity showed signs of recovery, buoyed by lower interest rates.

Despite these mixed signals, the Canadian dollar has depreciated due to the strength of the US dollar, and global financial conditions have eased.

Key Developments to Watch in Canada

Several domestic factors are shaping the outlook for growth and inflation:

• GDP and Employment: Q3 GDP growth was slower than anticipated, and unemployment has risen to 6.8%. Wage growth remains strong but outpaces productivity.
• Policy Changes: New measures, including GST breaks, one-time payments to individuals, and adjustments to mortgage rules, are influencing demand and inflation dynamics.
• Immigration Levels: Reduced immigration targets are expected to impact GDP growth next year, with muted effects on inflation as both demand and supply are dampened.

Real Estate and Housing Market Impact

For the housing market, the latest rate cut is a potential game-changer:

• Boost in Activity: Lower rates are stimulating consumer spending and housing activity, creating opportunities for buyers and sellers.
• Affordability: Buyers benefit from reduced borrowing costs, while sellers may see more competitive offers as demand increases.
• Stability in Inflation: With inflation around 2%, the Bank is maintaining a stable environment for investment.

Looking Ahead

The Bank’s Governing Council remains committed to keeping inflation within its 1-3% target range while supporting economic growth. With today’s decision to reduce the policy rate by 50 basis points, further rate cuts may be on the horizon. However, the Bank will evaluate each move based on incoming data and its implications for inflation and growth.

As uncertainty lingers, particularly with potential US tariffs on Canadian exports, staying informed and proactive in navigating these changes is critical—especially in real estate, where shifts in interest rates significantly impact the market.

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If you’re considering buying, selling, or investing in real estate, now is the time to act. Connect with us to discuss how these changes can benefit your goals!

GTA Home Sales Up Substantially in November

November 2024 saw a strong rebound in home sales across the Greater Toronto Area (GTA), marking a notable year-over-year increase. Many buyers benefited from improved affordability, driven by lower borrowing costs, while new listings also rose, albeit at a slower pace. This shift led to a tightening of market conditions and a notable uptick in average prices.

A Positive Outlook for 2025

As 2024 draws to a close, Toronto Regional Real Estate Board (TRREB) President Jennifer Pearce highlighted the improvement in the housing market. She noted that many home buyers had been waiting on the sidelines, expecting reduced inflation and lower borrowing costs. With home prices still below their historic highs and mortgage payments decreasing, Pearce anticipates a market recovery in 2025.

Key Market Statistics

Home Sales Comparison:

• Overall Sales: 5,875 homes sold, up 40.1% from last year
• By Home Type:
  • Detached Homes: 2,669 units, +43.9%
  • Semi-Detached Homes: 502 units, +24.9%
  • Townhouses: 1,009 units, +46.0%
  • Condos: 1,640 units, +36.3%

Average Selling Price Breakdown (vs. Nov 2023):

• Detached Homes: $1,452,518 (+43.9%)
• Semi-Detached Homes: $1,077,254 (+24.9%)
• Townhouses: $892,304 (+46.0%)
• Condos: $689,599 (+36.3%) 

New Listings:

• Total New Listings: 11,592, an increase of 6.6% from last November

Market Segments: Single-Family Homes vs. Condominiums

TRREB’s Chief Market Analyst, Jason Mercer, pointed out that market conditions are tightening, especially in the single-family home market. Detached homes, particularly in Toronto, saw average price growth outpacing inflation. However, the condominium segment has experienced lower average selling prices year-over-year, offering buyers more negotiating power. As borrowing costs continue to decrease, this could attract more renters into homeownership, particularly in the condo market.

The Rental Market and the LTB Backlog

While the housing market is recovering, the rental market remains relatively stable, although demand is expected to rise as more renters transition into homeownership. The ongoing issue of the Landlord and Tenant Board (LTB) backlog remains a concern. Recent data shows a backlog of 53,000 cases, and the need for reform is evident. A recent Ipsos poll revealed strong public support for government action to address this issue. TRREB CEO John DiMichele emphasized that investing in the LTB’s staffing, technology, and processes will help resolve cases more efficiently, benefiting both tenants and landlords.

Looking Ahead: What’s Next for the GTA Housing Market?

As 2025 approaches, experts predict a continued improvement in market conditions. With lower borrowing costs, higher buyer demand, and ongoing government efforts to streamline the LTB, the stage is set for a more active and competitive housing market in the months to come.

For more insights and personalized advice, connect with us today!

With the final Bank of Canada (BoC) interest rate announcement of 2024 approaching on December 11, Canadians are wondering not if rates will be cut but by how much. This marks the eighth and last policy decision of the year, concluding a year of significant monetary easing after a period of historic tightening in 2022-2023.

Here’s what the Big Five Banks are forecasting and their reasoning:

1. TD Bank: A "Close Call"

• Forecast: 25 basis points (bps) cut.
• Economists at TD have consistently maintained their prediction of a smaller rate cut, even after October's unexpected 50 bps cut.
• While labor market data shows unemployment rising to 6.8%, the continued resilience in job growth and housing market performance supports their conservative call.
• However, TD acknowledges that markets are increasingly pricing in a larger 50 bps cut, making this a tight decision for the BoC.

2. Scotiabank: Leaning Toward 50 bps

• Forecast: 50 bps cut, though with reservations.
• Economist Derek Holt supports the possibility of a half-point reduction but outlines reasons for caution:
  • Pros: Markets are already priced for a larger cut, and inflation risks appear manageable.
  • Cons: October saw inflation rise to 2% year-over-year, suggesting caution to avoid stoking inflation further.
• Holt describes BoC Governor Tiff Macklem as favoring a dovish stance, but he acknowledges data-dependent risks.

3. CIBC: "Why Not 50 bps?"

• Forecast: 50 bps cut.
• Economist Avery Shenfeld argues for a decisive move, suggesting a half-point reduction could accelerate the needed economic relief without risking runaway inflation.
• Shenfeld predicts that rates could drop to 3% or lower by mid-2025, advocating for proactive measures now to boost economic growth.

4. RBC: Confident in 50 bps

• Forecast: 50 bps cut.
• Economists at RBC anticipate a half-point cut, adding to the 125 bps already reduced since June. They argue that current rates are still too high to maintain inflation at the BoC's 2% target.
• Resilient consumer spending and housing demand are noted, but GDP growth remains below expectations, supporting their forecast.

5. BMO: Hesitant Agreement on 50 bps

• Forecast: 50 bps cut, though not ideal.
• BMO economist Benjamin Reitzes acknowledges the rationale for a larger cut, citing rising unemployment and mixed economic data. However, he warns of potential risks, particularly to the housing market:
  • Recent easing of mortgage insurance rules could stoke housing demand, exacerbating affordability challenges.
  • Reitzes emphasizes caution to avoid overheating the housing sector.

Key Takeaways

The consensus among major banks is a 50 bps cut, but opinions vary on the implications and risks:

• Larger cuts could stimulate growth but risk reigniting housing market challenges.
• Smaller cuts might better balance inflation and affordability concerns but may delay economic recovery.

As the BoC prepares for its final decision, all eyes remain on how these forecasts will play out, shaping Canada’s economic landscape heading into 2025. Stay tuned for updates on what this announcement could mean for your mortgage and financial plans.

For more insights and personalized advice, connect with us today!

The Canadian government has announced significant changes to mortgage rules, with the changes scheduled to take effect in coming weeks. Here's what these updates mean and how they could affect you:

KEY CHANGES

1. Higher Insured Mortgage Cap

Previously, to qualify for mortgage insurance with less than a 20% down payment, your home needed to cost under $1 million. Now, the government is raising this limit to $1.5 million, effective December 2024. This reflects rising home prices in cities like Toronto and Vancouver, helping more buyers qualify for insured mortgages with lower down payments.

2. 30-Year Amortization for First-Time Buyers and New Builds

First-time homebuyers and those purchasing newly built homes will now have the option of a 30-year amortization instead of the standard 25 years. This change is intended to reduce monthly payments and ease the burden on new buyers entering the market.

3. Expanded Opportunities to Switch Lenders

The Office of the Superintendent of Financial Institutions (OSFI) is eliminating the stress test for uninsured mortgage switches. If you've put down 20% or more, no more proving you can afford your mortgage at higher rates when switching lenders at renewal—making it easier to explore new options and secure better deals.

WHAT DO THESE CHANGES MEAN FOR YOU?

• More Affordable Down Payments
  With the increased cap, more buyers can enter the market with a smaller down payment. Under the new rules, a $1.5 million home could require as little as $125,000 down, compared to the previous requirement of $300,000.

  But with the new insured mortgage limits, the sliding scale for down payments could change. So far, we haven’t seen details on whether this will stay the same or be updated, but it’s something to keep an eye on.

• Lower Monthly Payments
  The extended 30-year amortization period will lower monthly mortgage payments, although it may result in paying more interest over time.

• Increased Competition Among Lenders
  With easier lender switches at renewal, homeowners will be able to negotiate better interest rates. Previously, the stress test created an advantage for existing lenders, often preventing borrowers from accessing the lower rates available on the market.

NAVIGATING MORTGAGE CHANGES:
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In today’s evolving market, staying informed and making well-considered decisions is key. Whether you’re a first-time buyer, refinancing, or simply exploring options, I’m here to guide you with expertise and insight.

With trusted contacts at all major banks, I can connect you to the right lenders and solutions tailored to your needs. Let’s work together to ensure your mortgage strategy supports your financial goals and provides peace of mind.

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