Bank of Canada Holds Steady with 5% Key Rate

After implementing three rate increases this year, the unveiling of the June gross Domestic Product figures and Q2 2023's data affirms that the adjustments to the overnight lending rate have effectively moderated the nation's economic momentum. The Bank of Canada shared today that they are maintaining the overnight lending rate at 5%, providing a respite to numerous Canadians. "There's been a discernible deceleration in the Canadian economy, a necessary step to alleviate pricing pressures. The year's second quarter witnessed a significant slowdown in economic growth, showcasing a 0.2% annualized contraction. This is indicative of a substantial reduction in consumer growth, a dip in housing activities, and the repercussions of widespread wildfires across Canada," the announcement detailed.

Fall Real Estate Dynamics in Canada

Post the summer lull, the autumn season often revives Canadians' interest in property, aligning with their return to regular routines. Given the unpredictability experienced in the past few months, forecasting the fall market's trajectory is a challenge. However, Lauren Haw, Zoocasa's Broker of Record and industry Relations Officer, anticipates a subdued September. "Potential sellers, wary of the rate increment and the subdued media coverage during summer, might hold off till September ends to gauge price movements before deciding on listing their property," she noted.

But there's always a cohort of determined buyers. The persistently low home supply could potentially trigger a surge in listings. "The current dearth in home availability is likely to sustain prices at a level that will instill confidence in potential sellers. We can anticipate a significant number of new listings by October," Haw elaborated.

Extended Amortization Periods Gain Traction Among Major Banks

While the decision to retain the rate offers a silver lining, Canadians are grappling with the implications of the escalated rates and are inclining towards longer amortizations to ease monthly installments. Recent third-quarter earnings reports from leading banks like RBC, TD Bank, CIBC, and BMO reveal that 40% of their existing mortgage clientele have opted for mortgages that exceed the conventional 25-year tenure.

Read More: How the Bank of Canada’s third 2023 Interest Rate Hike Affects Canadian Real Estate

For those contemplating a fresh mortgage or approaching renewal, extending the amortization duration might enhance monthly affordability. Several prominent banks are currently proposing 30-year tenures, and certain alternative lenders even extend offers up to 35 years. We have partnered with nesto to bring our clients some of the lowest rates available in Ontario.

To delve deeper into our predictions for the autumn real estate market feel free to contact us we are happy to help guide you through the fall real estate market.