Bank of Canada Cuts Interest Rates
In a significant move the Bank of Canada announced a quarter-percentage point reduction in its benchmark interest rate. This adjustment, following six consecutive holds in previous meetings, signals a pivotal moment in the central bank’s strategy to manage economic conditions.
The Bank’s policy rate now stands at 4.75 per cent, impacting borrowing costs across Canada, including mortgage rates and other types of loans. Homeowners with variable-rate mortgages and Canadians with debt linked to the central bank’s policy rate will see an immediate decrease of 25 basis points in their interest rates.
The Bank of Canada, in its statement accompanying the decision, expressed confidence that recent economic data indicates a trajectory towards inflation returning to the central bank’s two per cent target. However, it cautioned that risks to the inflation outlook persist.
Looking ahead, the Bank of Canada’s next interest rate decision is scheduled for July 24th, with stakeholders in the Canadian real estate market closely monitoring developments and adjusting their strategies accordingly. So what does this mean? Let’s take a look…
Lower mortgage rates
Interest rate cuts typically lead to lower mortgage rates. This can make borrowing cheaper for homebuyers, potentially increasing demand for homes and supporting property prices. For those with adjustable-rate mortgages, cuts could translate into significant savings.
Increased affordability
Lower mortgage rates can improve affordability for homebuyers, particularly those with variable-rate mortgages or those looking to refinance their existing mortgages. This could stimulate home buying activity and support the overall real estate market.
Stimulated housing demand
Cheaper borrowing costs can incentivize prospective buyers to enter the housing market sooner or buy larger homes than they initially planned. This increased demand can contribute to upward pressure on home prices, especially in areas where supply is limited.
Boost to home sales
Lower mortgage rates may encourage more people to buy homes, potentially benefiting sellers in the real estate market. As more prospective buyers are enticed by favorable borrowing costs, the heightened demand can lead to a surge in home sales volume. This uptick in activity supports sellers by facilitating quicker property transactions.
Stay tuned as we’re here to help answer any questions you may have and provide expert advice as we continue to monitor interest rate cuts. The Bank of Canada’s next decision is expected on July 24th.
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