As widely expected, the Bank of Canada has decided to maintain its overnight interest rate at 5.0%. This decision aligns with the recent lower September inflation reading of 3.8% and a visibly weakening economy. Higher rates are effectively slowing down the economy.

The impact of higher interest rates is evident in the slowing housing market, which has struggled under the weight of our high-rate environment and stringent qualifying stress test. However, looking towards 2024, the Bank of Canada is expected to shift gears and implement rate cuts to stimulate economic growth if we are closing in on the 2% inflation target. This is promising for the over 50% of mortgages up for renewal in 2025 and 2026. Additionally, it is expected to have a significant impact on real estate market activity. We can expect a surge in buyer demand, given improved affordability, strong population growth due to substantial immigration, and a severe shortage of housing supply. These key factors will shape the future of the real estate market.

There’s one more Bank of Canada announcement this year, scheduled for December 6th.

If the tough stress test is making it impossible for you to get a mortgage but you can pull together a 20% downpayment, consider an alternative lender that qualifies at the lower contract rate. The rate will be higher but if you can afford the payments, you won’t need a very big increase in home value to offset the higher borrowing costs. And, when interest rates drop, you could refinance at a better rate.

Bottom line – if an alternative lender allows you to buy a house at a great price without straining your finances, paying a higher initial interest rate can really set you up for a secure financial future. Let’s talk!