How the Recent Interest Rate Cut Will Save Quebec Homeowners

Quebecers Respond to Interest Rate Cut

Quebecers are responding to the recent interest rate cut announced by the Bank of Canada on Wednesday, June 5 at 10:30 AM ET. Since July 2023, the key interest rate had been maintained at 5%, affecting the real estate market, house prices, and transactions throughout the province and the country. The recent 25 basis point reduction lowers the rate to 4.75%.

The impact of high-interest rates had been felt in the Quebec real estate market, leading to a decrease in sales activities. While the rate cut may not trigger an immediate rush of buyers, it could provide some relief to current homeowners with variable-rate mortgages.

Impact on Median-Priced Single-Family Homes

Based on statistics published by Centris, for example, for a Quebec homeowner who made a 10% down payment on a single-family home with a median price of $439,000 with a variable mortgage rate of 5.95%, it is estimated that a 25 basis point reduction would reduce their monthly payment from $2,237 to $2,185, saving $52 per month, or $654 per year.

Savings for Condo Owners

For a Quebec homeowner who made a 10% down payment on a condo worth $365,000, the savings would be approximately $44 per month, or $528 per year.

Considering the tax rate of the average Quebecer, a savings of $500 to $650 per year after tax represents a significant amount given the rising cost of living.

Of course, homeowners with fixed mortgage rates will not feel this direct impact on their payment in the event of a rate cut. However, we can assume that banks will offer fixed-rate mortgages reflecting the trend of the lower key interest rate, thus presenting better investment prospects.

Conclusion

We have likely reached the inflection point concerning key interest rates. This new rate cut marks a significant shift. If you are considering selling or buying your property and wondering if it is the right time to do so, it's crucial to surround yourself with real estate professionals who can guide you through these changing times. Ariane LeBlanc, a respected Residential and Commercial Real Estate Broker based in Québec, is well-positioned to provide invaluable advice and support. Whether selling or purchasing, Ariane's expertise can lead you to make well-informed decisions in this fluctuating market. Feel free to contact her at aleblanc@viacapitale.com or via phone at 581-500-1117 for personalized consultancy tailored to your real estate needs.