Rate Cuts Expected on December 11:
What It Means for You
The Bank of Canada (BoC) is set to make its final monetary policy announcement of 2024 tomorrow, December 11, and all eyes are on the central bank as speculation of a 50-basis-point rate cut dominates financial news. Here’s what this potential decision means for the Canadian economy, the mortgage market, and you.
Why Are Rate Cuts Expected?
Over the past few weeks, there has been a significant shift in the market’s expectations for this rate announcement:
- Earlier in November, the implied odds of a 50bp rate cut were just 10%.
- Today, those odds are over 90%, driven by recent weak economic data and clear signs of a slowing Canadian economy.
Here are the key data points contributing to this shift:
Labour Market Cooling
- November saw a net gain of 51,000 jobs, but 80% of these were in the public sector.
- Unemployment jumped to 6.8%, its highest rate in three years, with 1.5 million Canadians unemployed, including 87,000 more last month alone.
- Wage growth has slowed significantly, falling to 3.9% y/y, with average wages dropping 0.6% in November—the steepest decline since early 2021.
Insolvency Filings Rising
- October recorded a 15% y/y increase in consumer insolvencies, with Ontario seeing its highest filings since 2010.
- Monthly proposal filings, a popular restructuring option for unsecured debts, surpassed 10,000 for the first time.
- Business insolvencies are also on the rise, with consecutive months of increases after a dip earlier in the year.
Consumer Confidence Falling
- Canadians reported the sharpest 4-week drop in confidence since July 2022, citing concerns over job security and rising costs.
- Wage growth has slowed significantly, falling to 3.9% y/y, with average wages dropping 0.6% in November—the steepest decline since early 2021.
Insolvency Filings Rising
- October recorded a 15% y/y increase in consumer insolvencies, with Ontario seeing its highest filings since 2010.
- Monthly proposal filings, a popular restructuring option for unsecured debts, surpassed 10,000 for the first time.
- Business insolvencies are also on the rise, with consecutive months of increases after a dip earlier in the year.
Consumer Confidence Falling
- Canadians reported the sharpest 4-week drop in confidence since July 2022, citing concerns over job security and rising costs.
What a Rate Cut Means for You
Variable-Rate Borrowers
A rate cut directly benefits borrowers with variable-rate mortgages, as their payments adjust in line with the BoC’s target rate. For those already navigating tight budgets, this could provide immediate relief.
Fixed-Rate Borrowers
Fixed-rate mortgages may not experience immediate reductions, as they are influenced by bond market movements rather than central bank rate cuts. However, if rate cuts signal long-term economic easing, fixed-rate products could gradually adjust in the coming months.
Real Estate Market
Toronto’s housing market saw a 1.9% m/m increase in sales for November, with sales up nearly 50% for detached homes in the 416 area. Rate cuts could further boost activity as borrowing costs decline, but rising fixed mortgage rates remain a hurdle for many buyers.
Economic and Consumer Outlook
Labour Market Concerns
The growing long-term unemployment rate—now double last year’s levels—is a red flag for policymakers. Persistent joblessness not only reduces consumer spending but also increases defaults on debts like mortgages and loans.
Rising Debt Pressure
The rise in insolvencies indicates that Canadians are feeling the cumulative effects of higher interest rates and inflation. Many households are turning to proposals to restructure debts, signaling financial strain.
Inflation and Future Cuts
Despite inflation ticking up to 2.0% in October, economists expect the BoC to prioritize economic growth over inflation control. Projections for 2025 suggest further rate cuts, potentially lowering the target rate to 2.25% by year-end, providing broader economic relief.
Take Action Before the Year Ends
The end of the year is an ideal time to tackle debt consolidation. By addressing your financial challenges now, you set yourself up for a fresh start in January. Don’t let high-interest debt hold you back—take control of your finances and pave the way to a more secure future.
Ready to explore your options? Contact Cashin Mortgages today. Our team is here to help you simplify your finances, save money, and achieve your financial goals.
How to Navigate the Changing Market
For Homeowners
- Consider Refinancing: If rates drop further, refinancing could help you secure lower payments.
- Explore Variable Rates: If you’re comfortable with some risk, variable-rate mortgages could save you money in a declining rate environment.
- Plan Strategically: Consult with mortgage experts to find solutions tailored to your financial situation.
For Prospective Buyers
- Monitor the Market: Look for rate trends and lender updates to determine the best time to lock in your mortgage.
- Adjust Expectations: Rising fixed rates may require revisiting budgets or considering alternative property types.
Why Cashin Mortgages Is Here for You
At Cashin Mortgages, we understand how critical it is to stay ahead of market changes. Our team of experts can help you:
- Navigate refinancing opportunities.
- Evaluate variable vs. fixed-rate options.
- Create a tailored plan to meet your financial goals.
Contact us today to discuss your mortgage needs and ensure you’re making the most informed decisions as we head into 2025.
