For the second consecutive time, Canada’s central bank has cut its overnight lending rate. In its July 2024 announcement, the Bank of Canada reduced the target rate by 25 basis points, bringing it down to 4.50%.
Despite inflation remaining above the Bank's 2% target, the decision to lower rates is based on expectations that inflation will continue to ease as the global economy expands into 2026. This economic outlook supports the Bank’s strategy to gradually reduce rates while managing the delicate balance between combating inflation and preventing economic slowdown.
What Does the Rate Cut Mean for Homebuyers?
The recent rate cut in June, which marked the first reduction in four years, did not lead to the expected surge in homebuying activity. However, with a second consecutive rate cut, totaling a 50 basis-point drop, there may be renewed interest among potential homebuyers.
A Royal LePage survey conducted found that 51% of Canadians who paused their homebuying plans over the past two years would consider returning to the market after a reduction in the Bank of Canada’s key lending rate. 18% said they would resume their search with a 50 to 100 basis-point cut, while 23% indicated they would need a cut of over 100 basis points before reconsidering.
“Our research shows that many buyer hopefuls have been waiting for a concrete signal from the Bank of Canada that the economy is moving in the right direction,” said Karen Yolevski, COO of Royal LePage Real Estate Services Ltd. “A second cut to the overnight lending rate indicates just that, and with mortgage qualification thresholds continuing to come down, sidelined buyers may have the confidence they need to make their return to the housing market. We expect this will prompt a slight boost in activity in the short-term, followed by more robust buyer demand in the fall. In the meantime, some much-needed inventory has been building in major markets over the last few months, giving buyers more options to choose from. In addition to lower rates, this may also encourage more buyers to re-enter the market in the near future.”
The Bank of Canada’s next announcement is scheduled for Wednesday, September 4th.