The Bank of Canada’s 2025 interest rate announcements are coming up on these dates:
- Wednesday, January 29
- Wednesday, March 12
- Wednesday, April 16
- Wednesday, June 4
- Wednesday, July 30
- Wednesday, September 17
- Wednesday, October 29
- Wednesday, December 10
The first of eight interest rate announcement of 2025 happens in 2 days on January 29th, 2025, but what’s it going to bring?
Why We can Expect Another Cut:
As of January 27th, 2025, the Bank of Canada is anticipated to announce a 25 basis point reduction in its benchmark interest rate on January 29th, 2025. This expectation arises amid potential U.S. tariff threats from President Trump, who has proposed a 25% tariff on Canadian imports starting February 1st, 2025. If implemented, this would lower the benchmark rate to 3.0%, marking the sixth consecutive rate cut since June.
The Canadian dollar has been a bit volatile with all this news. On January 21st, the dollar bounced back after an earlier dip against the U.S. dollar as investors weighed the chances of these tariffs actually happening. Prime Minister Trudeau reiterated that his government is ready to respond to all scenarios if President Trump imposes tariffs on Canada, adding that President Trump’s promised prosperity for the U.S. will require Canadian resources to fuel it.
Meanwhile, inflation in Canada dropped to 1.8% in December 2024, partly due to a sales tax break that kicked in mid-month. “Overall, there are a lot of moving pieces and temporary factors playing out in the inflation data at the moment,” said Andrew Grantham, senior economist with CIBC Capital Markets said. This lower inflation adds to the expectation that the Bank of Canada will lower rates, whereas the Canadian bond yields moved lower across a flatter curve. The 10-year was down 3.6 basis points at 3.242%, its fifth straight day of declines.
How will this Effect the Real Estate Market?
- Increased Demand: Lower interest rates make borrowing cheaper, reducing mortgage costs for buyers. This will lead to a surge in demand for homes, for both buyers looking for a home and investors looking to capitalize on lower financing costs.
- Price Growth: As we all know that when demand increases and with relatively low inventory, the prices on homes will continue to increase as competition on homes increase as more buyers enter the market.
- Boost to Investment Properties: With reduced carrying costs, more investors may consider entering the market, purchasing rental properties or second homes.
If the BOC cuts interest rates on January 29, 2025, the real estate market is anticipated to be bustling with activity. With cheaper borrowing costs, more buyers will be entering into the market, and with more sellers listing their homes in the market, we can still expect the competition to increase, as there could be fewer properties available compared to demand, pushing prices up in the short term. Investors will also be attracted due to Calgary’s growing population and rental demand, which could drive more development in multi-family properties and up-and-coming neighbourhoods. Overall, we’ll likely see more market activity, competition, and rising prices, especially in key areas.
With the BOC’s expected rate cut, it will most likely boost the activity in the real estate market. With borrowing costs going down, ultimately more buyers will enter the market, which will lead to more competition and higher prices if inventory becomes limited once again. However, as sellers start listing their homes and investors look to cash in on Calgary’s growth, we’ll probably see a spike in market activity. In short, this rate cut will likely make the market more active and competitive, especially for the spring market, with prices going up and more competition all around.
“Fasten your seatbelts. It’s going to be a bumpy ride”.
