BoC Cuts Rates In June 2024 Update. What Happens Next?

A hand cutting interest rates on a piece of paper with a pair of scissors.

In a surprising move, the Bank of Canada (BoC) announced a rate cut in June 2024, marking a shift in its monetary policy. This cut aims to stimulate growth and support economic recovery. However, it has raised many questions about its impact on the economy, housing market, and consumer behavior.

What are the reasons behind Bank of Canada’s June 2024 rate cut? 

The BoC’s decision to cut rates stems from a combination of global and domestic factors. Globally, the ongoing trade tensions and geopolitical risks have created economic uncertainties, slowing down growth in major economies. Domestically, Canada faces challenges such as sluggish GDP growth, declining exports, and rising unemployment rates.

Now that the rates are cut, it will lower borrowing costs and encourage people to spend more. Lower interest rates make loans more affordable, so people can afford taking home and car loans. On the other hand, it is good news for businesses as they can take on new projects through financing and will need to hire people, thereby creating more jobs. 

How does the rate cut impact the real estate market in Ontario? 

It goes without saying that real estate will see the most noticeable change. Lower interest rates typically result in lower mortgage rates, which makes homeownership more affordable. However, potential buyers should remain cautious. While lower rates make buying more attractive, the increased demand can create competitive bidding situations. 

We saw in May 2024 that real estate markets in bigger cities like Toronto and Vancouver were once again becoming buyer’s markets. National sales have gone up over 10%. James Laird, Co-CEO of Ratehub.ca and President of CanWise mortgage lender, says “it will be interesting to see if heat returns to the real estate market across the country or perhaps a quarter-point cut will not be enough to fuel the fire.”

a person in black shoes standing on a blue background with an arrow pointing to the words save and spend.

How will it impact other areas of your life? 

While lower interest rates can stimulate spending, they can also impact savings and investments. With reduced returns on savings accounts and fixed-income investments, savers may need to explore alternative investment options to achieve their financial goals. 

Lower interest rates can increase demand for goods and services and result in their prices going up. The BoC’s rate cut can also influence Canada’s economic relations with other countries. A lower interest rate can lead to a weaker Canadian dollar, making exports more competitive on the global market.

If this rate cut impacts the Canadian economy, we can expect another rate cut during the next update. 

Planning to take advantage of this lower rate and purchase your first home in Brampton? Schedule a free consultation with Realtor Catherine Nacar today!

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