OTTAWA (Reuters) -The Bank of Canada is starting to see the impact of its four rate cuts so far this year and expects to gather more evidence in the months ahead, Governor Tiff Macklem said on Tuesday.

The central bank last week cut its key benchmark rate by 50 basis points to 3.75%, its first bigger-than-usual move in more than four years, and hailed signs the country had returned to an era of low inflation.

The central bank, which hiked rates to a 20-year high to fight soaring prices, has now cut four times in a row since June. Inflation in September sank to 1.6%, below the 2% target.

“You are starting to see some impact of (the cuts). Some of it is more anecdotal – I expect we will see more in the data going forward,” Macklem said.

Macklem, speaking to the House of Commons finance committee, reiterated that the bank would be able to cut rates further if the economy evolved broadly in line with forecasts.

“We want to see growth strengthen. Last week’s interest rate decision should contribute to a pickup in demand,” he said.

(Reporting by Promit Mukherjee and David Ljunggren; Editing by Leslie Adler, Sandra Maler and Daniel Wallis)

Full Article at Bank of Canada says it is starting to see impact of recent rate cuts

The Bank of Canada has lowered its key interest rate to 3.75 per cent, making a 50 basis-point cut for the first time since the COVID-19 pandemic.

Before Wednesday, the rate stood at 4.25 per cent. Economists were expecting the central bank to go with a larger-than-usual cut, compared to the 25-basis-point downgrades made in June, July and September.

The last time the bank made a cut this size was on March 27, 2020.

As concerns over inflation have subsided — out-of-control price growth, the catalyst for the central bank’s initial rate-hike campaign, is now back within the target range — the bank has focused on cutting to keep inflation stable and support economic growth, which has slowed under the pressure of high rates.

“We need to stick the landing,” Bank of Canada governor Tiff Macklem told a news conference Wednesday morning.

“With inflation back to two per cent, we want to see growth strengthen. Today’s interest rate decision should contribute to a pickup in demand.”

Macklem outlined the economic conditions that informed the bank’s rate cut decision. He noted that core inflation has continued to ease, as has shelter inflation, though he noted that housing prices are still elevated. Excess supply in the economy has brought consumer prices down

“Job layoffs have remained modest but business hiring has been weak, which has particularly affected young people and newcomers to Canada. Simply put, the number of workers has increased faster than the number of jobs,” he added.

Macklem noted during the conference that, should the economy continue to evolve broadly in line with its forecast, the bank expects to reduce the policy rate further. But he cautioned that the timing and pace of cuts would depend on incoming economic data and its potential impact on the bank’s inflation outlook.

He repeated a now-familiar refrain, saying that the Bank of Canada will take decisions one meeting at a time.

Why aren’t Canadians feeling relief?

During a news conference, Macklem responded to questions from reporters who asked what he would say to Canadians who aren’t feeling the impact of lower inflation and interest rates in their everyday lives.

“It has been a long road back from the high inflation we experienced coming out of the pandemic,” said Macklem. “It’s been a long fight, but it’s worked…. I think Canadians can breathe a sigh of relief.”

One reporter pushed back on the governor, saying that many Canadians aren’t feeling relief. “We’re very aware of that,” Macklem responded.

“You can see it in our own consumer survey. There is a lot of hesitancy. I think the message today is that, with inflation down, Canadians don’t have to worry as much about big changes in their cost of living.”

Canadians might not be feeling relief from lower inflation because it doesn’t mean lower prices. A lower inflation rate indicates that prices are still increasing, but doing so at a slower pace.

Avery Shenfeld, chief economist of CIBC World Markets, wrote in a note to clients that “it would take a significant turn of events to stand in the way of another cut of that magnitude in December.”

“That said, as has been its practice of late, the bank has kept its options open by not signalling anything specific about the size of individual rate cuts ahead,” Shenfeld wrote.

By: Jenna Benchetrit

Full Article: Bank of Canada cuts key interest rate by half point for first time since COVID-19 pandemic (msn.com)

Canada’s housing market could soon see some major changes to mortgage rules that might make owning a home more realistic for Canadians, especially first-time buyers.

Announced by the Department of Finance on Monday and touted as the “boldest mortgage reforms in decades,” these updates are slated to kick in in December and aim to make mortgages in Canada more affordable, especially for millennials and Gen Z.

So, what’s new? First, the government has announced it’s raising the price cap for insured mortgages to $1.5 million. This move aims to help people in more expensive markets like Vancouver and Toronto, where home prices have skyrocketed in recent years. It means buyers could qualify for a mortgage with less than a 20% down payment on homes priced up to $1.5 million, as opposed to the current $1 million cap.

Another major change is the expansion of the eligibility criteria for 30-year amortizations that were originally introduced last month. This means allowing lower monthly mortgage payments over a longer period of time, offering short-term relief for many young Canadians who are just starting their careers.

Currently, the maximum amortization period for most insured mortgages in Canada is 25 years — although as of August, the government made changes to allow 30-year mortgage amortizations for first-time homebuyers who are purchasing new builds. Now, it’s expanding eligibility for these extended mortgages to all first-time buyers and all new builds.

These reforms are set to come into effect on December 14, 2024, and they come shortly after changes already introduced last month. This includes new rules that allow insured mortgage holders to switch lenders at renewal without going through another stress test, giving homeowners more flexibility to shop around for the best deal.

The federal government says these new rules are part of its broader housing plan to boost housing construction and address the housing shortage across the country. The plan aims to open up nearly 4 million new homes, making it easier and more affordable for Canadians to find a place to call their own.

If you’re considering buying a home, these changes could offer new opportunities, but it’s a good idea to chat with a mortgage expert to understand how the new rules might benefit you!

Story by MTL Blog Staff

Full Article: Canada’s new mortgage rules could make it easier to buy a home — Here’s what you need to know (msn.com)