This morning the Bank of Canada (BoC) announced it would not make a cut to its overnight lending rate — leaving it at 2¾%. Those who anticipated a 25 basis point cut are disappointed, believing that it would have impacted Alberta’s mortgage landscape.

Impact of a Rate Cut on Alberta Mortgages

Variable-Rate Mortgages

For existing homeowners in Alberta with variable-rate mortgages, a rate cut would have been welcome news. Typically, lenders adjust their prime rates when the BoC changes its overnight rate. A 25 basis point reduction would mean that, within days, borrowers could have seen a corresponding decrease in their mortgage interest rates, which means lower monthly payments. This immediate relief would have been particularly beneficial for those managing tight household budgets — something everyone is doing right now.

In the event of a cut, we could start to see more new buyers in Alberta, particularly in cities like Calgary and Edmonton where the housing market has been stabilizing. A decrease in the benchmark rate would likely make borrowing more affordable for buyers who have been waiting to get in the market. If that is the moment you’re waiting for, make sure you’re prepared, most speculators still remain optimistic that we will see a cut before the end of the year.

Fixed-Rate Mortgages

While fixed-rate mortgages are not directly tied to the BoC’s overnight rate, they are influenced by bond yields, which often move in anticipation of changes made by the BoC. A rate cut may lead to a decline in bond yields, potentially resulting in lower fixed mortgage rates in the near future. However, the extent of this impact will depend on various factors, including market expectations and changes in the economy.

Additionally, existing home owners with fixed rates coming up on renewal will need to pay close attention. A significant portion of Canadian mortgages—approximately 60%—are set to renew in 2025 or 2026. Many of these mortgages were initially secured during periods of historically low interest rates. Even if the BoC lowers the rate at the end of next month, renewals may still occur at higher rates than the original terms, leading to increased monthly payments for some homeowners.

Strategic Steps for Mortgage Holders

• Review Your Mortgage Terms: Understand how a rate cut could affect your specific mortgage type and terms.

• Consult with Mortgage Professionals: Engage with mortgage brokers or financial advisors to explore refinancing options or adjustments to your mortgage strategy.

• Monitor Market Trends: Stay informed about further rate changes (the next one comes on July 30th) and economic developments that could influence mortgage rates and housing market dynamics.

Looking Ahead

The BoC stated that they are “focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.” For Alberta homeowners, the potential for a rate cut next month offers an opportunity to reassess mortgage strategies and potentially capitalize on lower borrowing costs. However, it’s crucial to remain vigilant and informed, as the economic landscape continues to evolve.

For personalized advice and to explore mortgage options tailored to your needs, consider consulting with local mortgage professionals like me who can provide insights specific to Alberta’s market conditions.