Canada’s Rate Cut: Impact on Ontario’s Housing Market

The recent 0.5% interest rate cut by the Bank of Canada is set to impact buyers and sellers across Ontario. With lower borrowing costs, many are wondering how this shift will affect affordability, home prices, and the mortgage market.

Mortgage Savings: How Much?

The rate cut means noticeable monthly savings for buyers. For a typical Ontario home priced at $923,000, with a 75% mortgage of $692,250, the rate drop from 6% to 5.5% can save you $200 per month—or $2,400 per year. This can make homeownership more affordable, but there’s more to consider.

Rising Prices: Should You Wait?

Lower rates can lead to increased buyer demand, which often pushes home prices higher. If Ontario’s average home price increases by just 5% to $969,150, buyers may end up borrowing more, which could offset the savings from the lower rate. Waiting too long could mean paying more despite the rate cut.

The Stress Test: Qualifying is Still Tough

Even with lower rates, buyers must pass the mortgage qualifying rate, which tests whether they can handle payments at either 5.25% or the contract rate plus 2%. With a 5.5% contract rate, you’d need to qualify at 7.5%, making it challenging for some to secure a mortgage despite lower payments.

Sellers: Time to Plan Your Exit or Stay Strategy

For sellers, the rate cut may boost buyer activity, creating the perfect moment to list your home. However, having a clear strategy is just as important as timing the market. Deciding whether to sell now or hold off for further price gains is crucial in a competitive market.

Conclusion: Strategy First

The 0.5% rate cut presents opportunities, but it’s essential to have a solid plan. Buyers should weigh the risk of rising prices, and sellers need a strategy for maximizing their return. For personalized advice, visit Zumin, and connect with a Zumin Real Estate Professional to discuss your plans.