Bank of Canada slashes key interest rate to 3.75%

The Bank of Canada announced Wednesday its largest cut to the key interest rate since the start of the pandemic, slashing it by 50 basis points from 4.25 per cent to 3.75 per cent.

“It was appropriate to take a bigger step today, so that’s what we did,” said Bank of Canada governor Tiff Macklem.

It’s the fourth consecutive rate cut since June and gives some much-needed relief to homeowners.

Kyle Arbuthnott purchased his Kitchener, Ont. home with a variable rate mortgage in 2022. When the key interest rate rose to 5 per cent, his mortgage payment went up by $800 per month.

“I’ve noticed how much of an impact the interest rate has on myself and my partner,” he told CTV News. “We’ve felt the squeeze over the last couple of years.”

Arbuthnott said the 50 basis point drop will save him around $150 per month.

Tony Johal, a real estate expert in the Region of Waterloo, believes the rate cut could finally push more buyers to get into the market.

“When the rates are a lot higher it just makes it more difficult to qualify for that particular [mortgage],” he explained. “Now with the rates coming down, they can look and be like: ‘OK, you know what? I’m going to jump in now.’”

The Bank of Canada’s next key interest rate announcement is expected in December.

According to mortgage broker Victor Tran, economists are forecasting further rate cuts.

“It seems like we have quite a bit of room for rates to be dropping, possible by 1 per cent, 1.5 per cent,” he told CTV News. “It seems like, overall, the trend is downwards and the writing is on the wall.”

Despite the possibility of even lower rates, Tran warns buyers against waiting too long for the best deal. He said it could be a costly mistake when more buyers eventually enter the market.

“You can shoot yourself in the foot, where you can wait too long and now you’re competing with an influx of buyers entering the market,” Tran said.

Johal agrees that getting a better deal on your interest rate may not outweigh the added purchase cost.

“You can have the best interest rate at that moment, at that time, but if you’re going into a bidding war and your pricing is pushed to $50,000 to $60,000 beyond what it is today, it’s all for nothing.”