Homeowners won’t see mortgage costs fall much as a result of the June 6 interest rate cut by the Bank of Canada but, with the next central bank rate decision scheduled for July, borrowers may not have to wait long for some relief, say economists and analysts.
The rate change was the first since July of 2023, when the central bank raised the rate to 5 percent, the last of a series of increases that pushed the rate up from historic lows.
But economists are warning borrowers not to expect much of an impact any time soon. Rates are still well above the 2020 level of 0.25 percent and anybody expecting a quick return to the era of cheap loans is likely to be disappointed, they say.
The bank warned that people renewing their five-year, fixed-term mortgages may still find themselves longing for the borrowing rates of 2020, when the central bank’s key policy rate had dropped to 0.25 percent. People on variable-rate mortgages, though, could start to see some relief sooner.
Analysts interpreted comments made by the central bank on June 5 as a positive sign that more rate cuts are coming, but Bank of Canada Governor Tiff Macklem said the bank will be “closely watching” key indicators such as wage growth inflation and corporate pricing behaviour before further rate decisions.
Canada’s inflation rate has fallen to 2.7 percent in April from 3.4 percent in December and “if inflation continues to ease, and our confidence that inflation is headed sustainably to the 2 percent target continues to increase, it is reasonable to expect further cuts to our policy interest rate,” Mr. Macklem said.
Still, TD Bank predicts further rate cuts will come quickly.
“Now that the BoC has opted to make a cut to its overnight lending rate, all eyes are on the central bank’s next scheduled announcement about its interest rate, which is scheduled for July 24.”
