In a surprise move, the Bank of Canada cut interest rates by 25 basis points (a basis point is a hundredth of 1 per cent) down to 0.75%. This has sparked a renewed interest in buyers, particularly younger Canadians, as revealed in a recent Bank of Montreal home buyers survey. More than 20 per cent of millennials have shortened their time-frame to make a home purchase and 75 per cent said they plan to purchase within 5 years.
Major banks dropped their 5-year fixed rates mortgages to as low as 2.84%, some other lenders even more. A 10-year fixed rate fell 85 basis points to 3.84 per cent. Variable rates were seen as low as 2.25% amongst the Big Six banks.
The negative impact of lower oil prices on the Canadian economy will likely keep interest rates low for the near term, supporting homes sales in areas known for affordability issues such as Toronto and Vancouver.