The Bank of Canada has carried out a second consecutive interest rate cut. George Kroll/Dreamstime.com

By Jesse Gill

Back of Canada interest rate cut to help home buyers, Medicine Hat expert says

Jul 24, 2024 | 5:51 PM

A Medicine Hat mortgage broker says the Bank of Canada’s interest rate cut on Wednesday will make it easier for those looking to purchase a home or renew their mortgage.

The bank’s quarter-percentage-point cut brings it’s policy rate down to 4.5 per cent, a second consecutive reduction officials said was motivated by continued progress on getting inflation down and weakening economic conditions.

Jayne Flaig, a mortgage broker with Trilogy Mortgage, says floating interest rates should also see a drop in the next few days.

“Home equity line of credit, variable rate mortgages, those things will be directly impacted as soon as the bank drops their prime rate,” Flaig said.

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“We don’t see direct correlation to the fixed rates. They probably will go down. They just won’t go down necessarily by a quarter point.”

Flaig adds that fixed rates are determined by bond yields, which right now are very tied to the American market.

“In Canada, we do need to see our fixed rates go down, we’ve been kind of held up because the ten year treasury in the United States hasn’t been dropping as quickly. When information comes out of the U.S. that’s negative on the economic front, that’s usually when we can see our fixed rates going down,” Flaig said.

“The market sentiment right now is going to be favorable because of the Bank of Canada interest rate drop. We probably will see a residual effect of that, but it won’t necessarily be 25 basis points.”

Flaig said a number of fixed rate mortgages will be coming up for renewals from near 2020 and beyond when there were some low rates historically.

“They are going to see quite a bit of a bump. The renewals that are coming up, people are feeling the pressure for sure. A couple hundred dollars a month makes a big difference for most,” Flaig said.

“My recommendation is to do your research. Get your renewal offer from your current lender and then reach out to a mortgage broker and see what they can do as well, and then at least you know that you’re getting the best offer.”

Flaig adds that variable rates are a really appealing option.

“It’s still a bit higher than what you would see for a fixed rate. It’s inverted right now is what we would call it. Normally we’d see the variable a little bit lower. There is a bit of risk on the front end. But I think on the back end, there’s not really that much risk because we’re probably going to see things go down,” Flaig said.

“Typically with a variable rate, you can lock in at a fixed rate at any time during your variable. You’re kind of being able to play both sides of the fence in that scenario. Although I don’t think you would want to lock in,” she added.

“Anyone who’s sort of on the fence and wants to kind of play the middle of the road, I’m recommending a three year fixed at this point.”

Flaig said the rate drop is positive news.

“Everyone’s feeling the pressure. Rents are high. Mortgage payments are going up. It’ll be really welcome for the community and across Canada.”