How the Bank of Canada’s Interest Rate Cuts Impact Your Edmonton Home Buying Journey

On Oct. 23, the Bank of Canada cut its key overnight lending rate to 3.75 per cent — dropping the figure by 50 basis points from the previous 4.25 per cent. The favourable lending rates – which once stood at 5 per cent – give new homebuyers improved leverage in finding a lower mortgage and make the dream of owning their own home more attainable.

Not only are the interest rate cuts working in favour of the homebuyer, but the recently announced 30-year mortgage option that the federal government is making available to first-time homebuyers is going to spur homebuying in in 2025, particularly in Edmonton.

In late July, the federal government announced it would allow “30 year mortgages for first-time buyers of new builds”. This significant change to mortgage rules would allow an additional five years to pay off a mortgage, which is anticipated to help create more opportunities particularly for Millennials and Gen Z’s to buy a new home.

It is no secret that Edmonton is already one of the most affordable cities in the country to buy a home, and the new interest rate cuts makes buying a home even more affordable now than just a few months ago. An overview of available bank mortgages Edmonton shows some opportunities.

The average 5-year fixed insurable mortgage rate in Edmonton is currently 4.82 per cent, and there are some institutions that offer a low as 4.14 per cent. While the average 5-year variable insurable mortgage rate in Edmonton is currently 5.52 per cent, but there are some that are offered at 4.80 per cent. Mortgage rate cuts in Edmonton are likely to follow when the Bank of Canada cuts interest rates further.

Notably, Edmonton’s benchmark housing prices only increased 35 per cent over the past 15 years, less than the CPI inflation of about 41 per cent. This comes even as Edmonton’s population continues to grow by about 37 per cent from 1,175,919 to 1,607,518.

These mortgage rate cuts in Edmonton make the Alberta capital even more appealing, as the  five-year price growth of homes in Edmonton (as of September 2024), 17 per cent, has been very modest compared to other major Canadian cities*, most notably 39 per cent for Toronto, 54 per cent for Montreal, 33 per cent for Vancouver, 40 per cent for Calgary, and 47 per cent for Ottawa.

It adds that this underperformance suggests the relative absence of speculation in the Edmonton real estate market, which, in turn, suggests a relatively ample housing supply. Given the correlation between home unaffordability and over-regulation of land use, Edmonton home buyers are reaping the fruit of housing freedom, especially fast approval of housing projects. Favourable mortgage trends 2024 Edmonton are expected to continue next year, which bodes well for the housing market Edmonton.

All economic indicators point that the Bank of Canada’s policy rate will continue to decline gradually over 2024 and 2025.

But it is worth noting that increase in population is likely to drive up demand in Edmonton, which can lead to land prices increasing compared to previous years—costs that ultimately add more dollars to a final home price. Match that with rental prices continuing to climb, and it’s very much likely that demand will climb in the next few months, which can then lead to higher construction costs and longer build times. Now just might be the best time to buy a new home in Edmonton.

*As per wowa.ca