Welcome to the latest episode of Make Money Count! With major shifts in interest rates expected, understanding these trends is more important than ever. Recent cuts by the U.S. Federal Reserve and promising signs from the Bank of Canada indicate that we may be entering a period of lower rates. In this episode, we break down the latest developments, discuss what they mean for your mortgage strategy, and offer insights on how to navigate these changes effectively.
U.S. Federal Reserve Sets the Stage for Rate Cuts
The U.S. Federal Reserve recently slashed interest rates by 50 basis points, with more cuts expected in 2024 and 2025. Federal Reserve Chair Jerome Powell has signalled that the Fed and bond market are now aligned, creating a more predictable environment for rate changes. This stability could also spill over to Canada, as both economies react to rising unemployment concerns and evolving inflation metrics.
Canada’s CPI Hits 2%: What This Means for Future Rate Cuts
In Canada, the Consumer Price Index (CPI) for August came in at 2%, with mortgage interest and shelter costs being the largest contributors. As mortgage rates begin to drop, we’re likely to see CPI figures fall even further. This could lead to an accelerated rate cut cycle by the Bank of Canada, which may reduce rates by 75 basis points by the end of 2024, and potentially another 100 to 150 basis points in 2025.
Should You Break Your Fixed-Rate Mortgage?
Now is a critical time for Canadian homeowners to review their mortgage options. With rate cuts on the horizon, many experts advise against early renewals into fixed-rate mortgages. Instead, consider breaking your current fixed-rate mortgage and switching to a variable rate, which could offer substantial savings. However, it’s essential to be mindful of potential interest rate differential penalties. Consult with a trusted mortgage advisor to explore your options and make an informed decision.
The Time to Act: Secure Your Variable Rate Mortgage Now
As we move into a period of economic uncertainty, staying informed about interest rates and mortgage strategies is more important than ever. Rates are expected to drop significantly over the next two years, which presents an opportunity to save on mortgage costs. Reach out to a mortgage broker or trusted advisor to review your situation and take full advantage of the upcoming changes.
Be sure to tune into our latest podcast for an in-depth discussion on these topics, along with expert insights on navigating the ever-changing mortgage landscape. At Cannect, we’re always here to provide guidance and help you make informed decisions in real estate and mortgages. If you have any questions, feel free to reach out, and don’t forget to like and subscribe to our content for regular updates.
