In a recent article in Le Devoir titled “How much will you save thanks to the interest rate cut?”, the impact of the Bank of Canada’s reduction in its policy interest rate on variable-rate mortgages is analyzed. John Fucale, Senior Vice-President of Broker Relations at Multi-Prêts Hypothèques, shares his perspective on the implications of this decision for borrowers.

What impact on your mortgage payments?

The Bank of Canada recently announced a 0.5 percentage point cut to its policy rate, lowering it from 4.25% to 3.75%. This reduction will directly affect variable-rate financial products, such as mortgages, and could ease borrowers’ monthly payments.

John Fucale explains: “Each 25-basis-point decrease represents an estimated savings of about $15 per month for every $100,000 of mortgage.” For example, on a $400,000 loan amortized over 25 years, monthly payments could drop by approximately $120, representing annual savings of more than $1,400.

Challenges in the real estate market

Although lower interest rates are good news, access to homeownership remains a challenge due to rising prices. In the third quarter of 2024, the median price of single-family homes in Quebec reached $448,550, a 7% increase compared to the previous year.

John Fucale warns that the combination of lower interest rates and new measures—such as the introduction of the First Home Savings Account and the extension of the 30-year amortization period—could create additional upward pressure on prices.

“There is reason to be cautious. There is a risk of bidding wars next year. We are increasing the pool of potential buyers, but we do not have the inventory to meet that demand. So I believe that, until there is enough new construction, access to homeownership will remain a challenge in 2025,” he notes.

Here is a suggested article.

To better understand mortgage market trends and strategies to take advantage of them, check out our other blog articles:

Contact your Multi-Prêts broker to explore solutions tailored to your financial situation and optimize your mortgage based on your needs.