Bank of Canada Rate Announcement Jul 24th, 2024

Tanya Toye • July 24, 2024

Bank of Canada reduces policy rate by 25 basis points to 4½%.

FOR IMMEDIATE RELEASE

July 24, 2024

The Bank of Canada today reduced its target for the overnight rate to 4½%, with the Bank Rate at 4¾% and the deposit rate at 4½%. The Bank is continuing its policy of balance sheet normalization.

The global economy is expected to continue expanding at an annual rate of about 3% through 2026. While inflation is still above central bank targets in most advanced economies, it is forecast to ease gradually. In the United States, the anticipated economic slowdown is materializing, with consumption growth moderating. US inflation looks to have resumed its downward path. In the euro area, growth is picking up following a weak 2023. China’s economy is growing modestly, with weak domestic demand partially offset by strong exports. Global financial conditions have eased, with lower bond yields, buoyant equity prices, and robust corporate debt issuance. The Canadian dollar has been relatively stable and oil prices are around the levels assumed in April’s Monetary Policy Report (MPR).

In Canada, economic growth likely picked up to about 1½% through the first half of this year. However, with robust population growth of about 3%, the economy’s potential output is still growing faster than GDP, which means excess supply has increased. Household spending, including both consumer purchases and housing, has been weak. There are signs of slack in the labour market. The unemployment rate has risen to 6.4%, with employment continuing to grow more slowly than the labour force and job seekers taking longer to find work. Wage growth is showing some signs of moderating, but remains elevated.

GDP growth is forecast to increase in the second half of 2024 and through 2025. This reflects stronger exports and a recovery in household spending and business investment as borrowing costs ease. Residential investment is expected to grow robustly. With new government limits on admissions of non-permanent residents, population growth should slow in 2025.

Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.4% in 2026. The strengthening economy will gradually absorb excess supply through 2025 and into 2026.

CPI inflation moderated to 2.7% in June after increasing in May. Broad inflationary pressures are easing. The Bank’s preferred measures of core inflation have been below 3% for several months and the breadth of price increases across components of the CPI is now near its historical norm. Shelter price inflation remains high, driven by rent and mortgage interest costs, and is still the biggest contributor to total inflation. Inflation is also elevated in services that are closely affected by wages, such as restaurants and personal care.

The Bank’s preferred measures of core inflation are expected to slow to about 2½% in the second half of 2024 and ease gradually through 2025. The Bank expects CPI inflation to come down below core inflation in the second half of this year, largely because of base year effects on gasoline prices. As those effects wear off, CPI inflation may edge up again before settling around the 2% target next year.

With broad price pressures continuing to ease and inflation expected to move closer to 2%, Governing Council decided to reduce the policy interest rate by a further 25 basis points. Ongoing excess supply is lowering inflationary pressures. At the same time, price pressures in some important parts of the economy—notably shelter and some other services—are holding inflation up. Governing Council is carefully assessing these opposing forces on inflation. Monetary policy decisions will be guided by incoming information and our assessment of their implications for the inflation outlook. The Bank remains resolute in its commitment to restoring price stability for Canadians.

Information note

The next scheduled date for announcing the overnight rate target is September 4, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on October 23, 2024.

Read the July 24th, 2024 Monetary Policy Report

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Stress-Testing Your Mortgage Affordability: Why It Matters

By Tanya Toye • July 8, 2026

Buying a home is one of the biggest financial commitments you’ll ever make. That’s why lenders want to be sure you can handle your mortgage payments—not just today, but also if interest rates rise in the future. This is where the mortgage stress test comes in. Many Canadians hear the term but aren’t entirely sure what it means or how it affects them. Let’s break it down in plain language. What Is the Mortgage Stress Test? The stress test is a rule introduced by the federal government that requires all mortgage applicants to qualify at a higher rate than the one they’ll actually pay. Currently, you must qualify at the greater of your contract rate + 2% or the benchmark qualifying rate (set by the Office of the Superintendent of Financial Institutions). For example: If your lender offers you a 5-year fixed mortgage at 5.25%, you must show you could still afford the payments at 7.25% . Even if rates don’t rise that high, the stress test ensures you won’t be overextended if they do. Why Does It Matter? The stress test protects both borrowers and lenders by: Preventing over-borrowing : It ensures you don’t take on more debt than you can realistically handle. Preparing for rate hikes : With interest rates fluctuating, it’s a safeguard against sudden increases. Strengthening financial stability : It lowers the risk of defaults, protecting the housing market as a whole. While it can sometimes feel like a barrier—reducing the amount you qualify for—it’s ultimately designed to keep you from becoming “house poor.” How Does It Impact Buyers? The stress test can significantly affect your homebuying budget. For example, without it, you might qualify for a $600,000 mortgage, but with the stress test applied, you may only qualify for $500,000. That doesn’t mean your dream of homeownership is out of reach—it just means you may need to adjust expectations or explore other strategies, such as: Increasing your down payment Paying down existing debts Considering alternative lenders who may have different qualification standards Why Work With a Mortgage Professional? Every lender applies the stress test, but not every lender views your application the same way. An independent mortgage professional can: Shop multiple lenders to find the best fit Run affordability scenarios at different rates Help you understand how much house you can truly afford—without stretching your finances too thin The Bottom Line The mortgage stress test isn’t meant to stop you from buying a home—it’s there to protect you from financial strain down the road. By understanding how it works and planning ahead, you can make smarter choices and buy with confidence. If you’re thinking about purchasing a home, refinancing, or simply want to know how the stress test affects your options, connect with us today. We’ll help you stress-test your budget and find the mortgage solution that works best for you.

Don’t Overlook Mortgage Penalties When Breaking Your Term Early

By Tanya Toye • July 8, 2026

When most borrowers shop for a mortgage, the focus is usually on one thing: the interest rate. While the upfront rate is certainly important, it’s only one piece of the puzzle. One of the most expensive surprises homeowners can face is discovering the cost of breaking their mortgage before the end of the term. Whether it's due to a move, divorce, job relocation, refinancing opportunity or another life change, mortgage penalties can vary dramatically depending on the lender and product selected. This is why understanding prepayment penalties should be a key part of the mortgage conversation from the very beginning. Variable vs fixed penalties Variable-rate mortgages generally offer more flexibility when it comes to breaking a mortgage early. Most Canadian lenders calculate the penalty for breaking a variable-rate mortgage as three months’ interest. While no one enjoys paying a penalty, the calculation is straightforward and relatively predictable. Fixed-rate mortgages are different. Most fixed-rate mortgages require borrowers to pay the greater of three months' interest or the interest rate differential (IRD) when breaking the mortgage before maturity. Depending on the lender, the penalty calculation may change over the course of the term and the IRD often becomes the dominant factor in determining the cost of breaking a mortgage early. The IRD penalty calculation compares your existing mortgage rate to the lender's current posted rate for a similar remaining term. This is where things become more complicated. Many borrowers receive discounted contract rates that are lower than the lender’s posted rates. However, lenders often use posted rates as part of their penalty calculations. As bond yields push fixed mortgage rates higher, some lenders also adjust posted rates, creating a disconnect that can significantly influence the size of an IRD penalty. In other words, two mortgages with similar rates today could produce very different penalties tomorrow if they need to be broken early. Product selection is more important than upfront rate Mortgage selection should never be based solely on the lowest advertised rate. Features, flexibility, portability options, prepayment privileges and penalty calculations can all have a meaningful impact on the overall cost of borrowing. It's also one of the reasons borrowers should stay connected with their mortgage broker throughout the life of their mortgage. Many homeowners assume the conversation ends once the mortgage funds, but ongoing communication can be incredibly valuable. Sharing your mortgage renewal details when talking to a mortgage broker allows them to better monitor your mortgage moving forward. Knowing your current rate, term maturity date and product structure helps them identify opportunities, anticipate challenges and provide guidance if your circumstances change before your next renewal. A mortgage is not just a rate – it's a long-term financial strategy. Understanding how penalties work today could save you thousands of dollars tomorrow. Before choosing a mortgage product, make sure you’re looking beyond the interest rate and considering the flexibility you'll have if life doesn't go exactly as planned. Wondering which mortgage product is right for you? I’m here to help explain all your options. 604-788-8693 | tanya@tanyatoye.ca