The Bank of Canada (BoC) has implemented a cumulative 1.75% reduction in its overnight rate throughout 2024, with the most recent being a 0.5% cut. These aggressive moves aim to stimulate the economy, but for Canadian mortgage holders, they translate to significant savings.
Whether you’re holding a variable-rate mortgage or renewing soon, the total impact of these rate cuts could mean thousands of dollars back in your pocket annually. For those in the Fraser Valley real estate market—serving Abbotsford, Langley, and Surrey—this shift could also change the buying and selling landscape.
Here’s what these cumulative rate cuts mean for your mortgage payments and the local housing market.
What Do These Rate Cuts Mean for Your Mortgage?
The 1.75% rate reduction has drastically reduced borrowing costs, particularly for variable-rate mortgage holders and those renewing from higher-rate terms set in 2022 and 2023.
Here’s a practical breakdown using a 30-year amortization:
- On a $500,000 mortgage:
- A 0.5% cut saves around $160–$180 per month.
- A 1.75% cumulative cut saves approximately $520–$620 per month.
For larger mortgages, such as $1,000,000:
- On a $1,000,000 loan with a 30-year amortization:
- At a pre-2024 rate of 5.5%, the monthly payment would have been approximately $4,542.31.
- After the cumulative 1.75% cuts (new rate: 3.75%), the payment drops to $3,705.64.
That’s a monthly savings of $836.67—or an annual savings of $10,040.04!
For an average townhome in the Fraser Valley, let’s say $800,000:
- With a 20% down payment, the mortgage would be $640,000.
- At a pre-2024 rate of 5.5%, the monthly payment would have been approximately $2,906.27.
- After the 1.75% cut (new rate: 3.75%), the payment drops to $2,372.56.
That’s a monthly savings of $533.71—or an annual savings of $6,404.52.
How This Impacts the Fraser Valley Real Estate Market
The benefits of these rate cuts extend beyond individual savings—they’re reshaping the real estate market in Abbotsford, Langley, Surrey, and beyond.
1. More Buyers Entering the Market: Lower borrowing costs mean buyers can qualify for higher mortgages, increasing demand for properties, especially townhomes and detached homes in the $800,000–$1,500,000 range.
2. Reduced Inventory Stabilizing Prices: Homeowners who were considering selling due to high mortgage payments in 2023 may now find their payments more manageable. This reduced supply of listings is likely to stabilize or even push home prices higher as demand increases.
3. Boost in Buyer Confidence: Many buyers sitting on the sidelines during 2023’s high-rate environment may now see this as the perfect time to enter the market. This increased activity bodes well for sellers and overall market dynamics.
Who Benefits the Most?
Variable-Rate Mortgage Holders: These homeowners have already seen their payments decrease substantially, offering breathing room in their budgets.
Renewing Homeowners: If your mortgage is up for renewal, you’re in a great position to lock in at lower rates, saving potentially thousands.
Buyers: Lower rates mean better affordability, enabling you to consider homes previously out of reach or simply enjoy lower monthly payments.
What Should You Do Next?
1. If You’re a Buyer: Speak to a mortgage broker to reassess your budget. You may now qualify for a higher mortgage or find payments on your dream home more manageable.
2. If You’re a Seller: Increased buyer demand and reduced inventory make this a great time to list your property. Let’s work together to position your home effectively in this evolving market.
3. If You’re Renewing: Don’t automatically accept your lender’s renewal offer. Shopping around can help you lock in a competitive rate and maximize your savings.
Fraser Valley Market Outlook
With these rate cuts in play, the real estate market in Abbotsford, Langley, and Surrey is poised for growth. The savings potential for buyers is significant, while sellers benefit from increased demand and stabilizing prices.
For an $800,000 townhome example in the Fraser Valley:
With a 20% down payment ($640,000 mortgage):
- At a pre-2024 rate of 5.5%, monthly payments were $2,906.27 (30-year amortization).
- With the new 3.75% rate, payments drop to $2,372.56, saving $533.71 monthly or $6,404.52 annually.
For a $1,000,000 mortgage:
- At a pre-2024 rate of 5.5%, monthly payments were $4,542.31.
- With the new 3.75% rate, payments drop to $3,705.64, saving $836.67 monthly or $10,040.04 annually.
These numbers demonstrate the real impact of rate cuts on affordability in our region.
Let’s Connect!
Are you ready to take advantage of the opportunities these rate cuts bring? Whether you’re buying, selling, or renewing, I can help you navigate the Fraser Valley market and make informed decisions.
Contact us today to discuss your real estate goals and how to make the most of these historic rate reductions.
Stay tuned for more real estate insights and tips tailored for homeowners and buyers in Abbotsford, Langley, and Surrey.