Mortgage Update
Hello Friends !!
The summer is finally here and we hope that you’re enjoying the warm and sunny weather. If you have vacation plans, we wish you all the best in your travels. If you’re ‘stay-cationing’, we wish you the lots of relaxation and recreation!
We’re excited to share with you the latest in mortgage news, rate expectations, and financial strategies.
First of all, it’s finally happening – the much-anticipated rate cuts have started. While fixed rates have shown a decreasing trend since September, the Bank of Canada finally made their move and issued a 0.25% rate cute on June 5th. This move marks the first cut since the Bank initiated its cycle of hiking rates in March 2022, and is the first in an expected series of moves downward.
Although we still cannot be sure of how many more cuts will happen this year, or how low they will go – most agree that this is the first and there is more to come.
Inflation appears to have been controlled with target rate of 2% within sight. Bank of Canada Governor, Tiff Macklem, has expressed openness to further cuts if inflation continues to ease or stabilise, but he did also note his concern about the influence of the shelter price on inflation rates – namely the impact of house prices, mortgage costs and rent.
With so many factors at play, it’s hard to make definitive predictions, but most people in the industry and the markets are, for now, expecting further rate cuts in 2024. Specifically, analysts expect that the bank will maintain the existing rate for its July meeting, with the possibility of another cut in September and potentially one more by the end of the year.
In other housing news, there have been some significant changes in this year’s federal budget, especially concerning housing policies. Here’s a breakdown of some key points related to mortgage financing:
Starting August 1, 2024, first-time homebuyers will have the option of extending their mortgage amortization from 25 to 30 years. This will reduce mortgage payments and potentially make home ownership more accessible.
The limit for withdrawing funds from RRSP under the Home Buyer’s Plan has been raised from $35,000 to $60,000. The grace period for repaying RRSP withdrawals has been increased to 5 years, up from previous 2 years, for all withdrawals made between January 1, 2022 and December 1, 2025.
So much has changed in mortgages and housing in Canada – and the only certainty we can all agree on is that it will continue to change. Every new government announcement or a rate change has an impact on the market, homeowners and potential buyers. As always – our advice to you is to look at your mortgage strategy as any other financial or life planning – review it often and be prepared to change it if opportunities arise. We’re here to help – and are happy to discuss and make a plan that’s right for you.