Relief for Canadian wallets

The three declines are in a row key level, the latter of which was announced Wednesday by the Bank of Canadaallowing several citizens to get their heads above water financially or access to property.

The Governor of the Bank of Canada himself admitted that Canadians have felt strongly the dramatic increase in interest rates over the past two years. They tightened their belts. “l’debt of Canadian households is high, and that’s one of the reasons interest rates have had a big impact,” he said at a press conference.

So Wednesday’s announcement is a breath of fresh air, according to Alexandre Bélanger, regional director – mobile mortgage specialists at TD Bank. A decline is expected for mortgages, car loans and personal loans. “This has ramifications in many areas of the economy. It will also be good for all the SMEs that need to finance themselves,” he said.

“The first to win are those who have variable rate mortgages,” however, affirms Mr. Bélanger. He remembers that about a third of mortgage loan holders have opted for this type of rate.

“Most lenders will pass on the reduction directly or increase the amount allocated to capital in monthly payments,” he said. He calculated that there was a drop of 0.25 points per percent representing a savings of about $50 per month on a $400,000 loan.

Economist and columnist Francis Gosselin is one of those owners who were immediately affected by fluctuations in the prime rate. “We bought the house just as rates were starting to rise. Although I follow this closely professionally, I did not expect it to reach 5%. It went up very quickly, the amounts [des paiements] has gone up about 50% since we bought the house. »

He describes the situation, which happened when he and his partner had a baby, as “painful”. “We took away part of our savings,” he said.

Payments have gradually decreased with policy rate cuts, the first of which was last June. The difference is still very small, but it is reassuring for Mr Gosselin, as several more rate cuts are expected.

Mortgage loans to renew

In addition, the economist is part of another group of owners who are affected by the important prime rate: those who need to renew a fixed rate mortgage loan. Indeed, the five-year term is coming to an end for Mr. Gosselin’s booth.

The challenge now is to negotiate with your financial institution and sign an agreement at the right time, as the offers become more attractive with each drop in the prime rate. In any case, his payments will increase, since rates have not returned to the historical levels of 2019.

“You have to shop around,” says Mr. Gosselin, also recommending using a mortgage broker, who can find the best rates for his clients.

Alexandre Bélanger, for his part, recommends that people who need to renew their loan start shopping four to six months before the deadline. “You can set a rate four months in advance, and if they keep going down, the customer will benefit from the best rate,” he explained. It also allows you to start planning the budget, because users who signed up in 2020 and 2021 will still be shocked. »

Power in the real estate market

Licensed real estate broker at Royal LePage, Marc Lefrançois notes renewed energy in the real estate market.

“In very fashionable neighborhoods in Montreal, such as Verdun, Villeray or the Plateau, we see up to 20% of multiple-offer transactions,” he observes. At the height of interest rates, almost no sales were decided in bidding wars, recalls Mr. Lefrançois, who believes that this activity will move to other neighborhoods as rates fall. It’s shaping up to be a very busy fall for real estate brokers.

Mr Lefrançois believes that the variable rate will be more profitable in the long term, but that buyers must ensure that, if they choose this formula, they will be able to survive financially if rates rise. again.

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