Bank of Canada's interest rate cut boosts optimism in Edmonton's housing market

This week's move by the Bank of Canada to cut its key interest rate by 50 basis points from 4.25 to 3.75 per cent is widely expected to have a positive impact on real estate and other sectors of Edmonton's economy.

Within hours of Wednesday's announcement, TD Bank, Scotiabank, BMO and other big banks announced they had lowered their prime interest rates from 6.45 per cent to 5.95 per cent.

The last time Canada's central bank made a 50-basis-point cut was on March 27, 2020.

With borrowing costs easing, real estate experts are predicting the local housing market will gain significant momentum, with a wave of new real estate investments in the coming months.  

"It's going to increase the amount of buyers that have the ability to purchase in our region," said Edmonton realtor Tom Shearer. "It'll give them more spending power, so they can go a little bit higher than they originally anticipated."

The rate cut will also create more competition for buyers and raise selling prices, Shearer said.

Edmonton mortgage broker Mark Holtem said homeowners with variable-rate mortgages will benefit.

"The interest-rate reduction could mean lower payments or an increase in their principal," Holtem said.

Real estate agent Chris Proctor said the lower borrowing costs will be good for Edmonton's market in general, boosting both the number of sales and the prices sellers get for their properties.

"Currently there's been more sales in 2024 than there have ever been in Edmonton history, so we're on an upwards trajectory," Proctor said.

"It's going to increase demand and we're probably going to see prices increase going into 2025." 

The central bank's decision reflects its efforts to support growth amid declining inflation and global economic conditions.

The rate cut is expected to have significant implications for local economies and markets across the country.

The bank's latest assessment indicates that while the global economy is expected to expand by about three per cent over the next two years, there are some challenges.

The U.S. is projected to experience stronger growth than previously forecast, while China's economic outlook remains weak. In Europe, growth has been slow but is expected to recover in the coming year.

As global inflation pressures ease, Canadian inflation has also dropped, falling from 2.7 per cent in June to 1.6 per cent in September, bringing it closer to the central bank's two per cent target.

The Canadian economy grew by about two per cent in the first half of 2024, with a forecast of 1.75 per cent for the latter half of the year.

The bank projects gradual GDP growth over the next few years, with estimates of 1.2 per cent in 2024, 2.1 per cent in 2025 and 2.3 per cent in 2026. The growth is expected to be fuelled by lower interest rates.

Holtem said he anticipates more rate drops in the winter months and an aggressive spring market.

He advises buyers to seek professional consulting as they navigate the new market.  

"Talk to your mortgage professional sooner rather than later to figure out what your situation is," he said.

"This interest rate is going to affect things slightly, but this is note bottom and it will constantly be changing." 

The Bank of Canada's next scheduled announcement regarding the overnight rate is set for Dec. 11, with a full economic outlook to be published Jan. 29.