Wednesday’s move by the Bank of Canada to cut its interest rate by 25 basis points might give some moderate relief to mortgage holders, but one expert says it’s not going to make waves in Vancouver’s real estate market.
Realtor Steve Saretsky says mortgage rates remain much higher than many property owners are used to.
“By cutting rates, it doesn’t move mortgages, which is the vast majority of the marketplace today,” he tells CityNews Wednesday. “So, there’s no real change there.”
If you’re on a variable-rate mortgage, Saretsky explains that for every $100,000 borrowed, mortgage holders will see a drop of about $15 per month.
“So, some relief. The impact here is from a sentiment perspective — that rates are done rising. Now it’s just a matter of reducing them, and we’ll see how that plays out.”
With the quarter-percentage-point cut, the central bank’s key interest rate now stands at 4.75 per cent, but Saretsky explains, variable-rate mortgages are still going to be around six per cent.
“There’s really not a whole lot of financial relief here in the news today. And for people that are going to renew their mortgages 12 months from now, that’s really going to depend on where fixed-rate mortgages are, which is determined by the bond market, by government spending, and the supply of government bonds.
“Which is ultimately a long way of saying, you might not see much lower rates from here. It really just depends on the trajectory of the economy and the bond market.”
Saretsky says that for those who are trying to crack into the Vancouver real estate market, as the inventory of homes available in the Lower Mainland creeps higher — especially in the condo market, the prices of homes are starting to drop modestly.
“There’s some deals to be had. I think buyers can go in and take their time and negotiate, and be a little more aggressive in the negotiation tactics,” he explained.
For what the future holds in interest rates, Saretsky says it’s anyone’s game.
“If we’ve learned any lesson over the last couple of years, is that predicting rates is really a mug’s game,” he said. “Coming into this year, December of 2023, the expectation was for six cuts from the Bank of Canada.”
“We just had our first, and there’s not a whole lot of time left in the year. So, instead of six, maybe it’s only two or three this year.
Saretsky doesn’t think the bank will cut interest rates aggressively, adding we’ll see higher interest rates for a longer time than we’ve previously seen over the last five years.
“We’re not going back to two per cent mortgages. So, I think people are going to have to slowly adjust their lifestyle, and maybe four [per cent] is the new low,” he said.
“People that are coming up for mortgage renewals or planning to make a purchase, I think just have to accept that there’s a good probability that’s the outcome moving forward.”
–With files from Mike Lloyd