The cottage real estate front, and the market in general, has seen a lot of changes over the last few months. April’s federal budget outlined a mixed bag of affordability measures, including an extension of amortization periods, increased RRSP withdrawal limits, and longer repayment timelines for first-time homebuyers. And, of course, there was the highly controversial proposal to hike the capital gains tax.
But a recent announcement from the Bank of Canada brings better news.
On June 5, the central bank cut its key interest rate to 4.75 per cent, down from the 5 per cent it’s been sitting at since last July. Rates have been gradually on the rise since March of 2022.
“This is smiles-all-around news,” says Andrew Thake, a mortgage broker in Ottawa. “For homeowners, to see your mortgage go down is a huge relief.”
Only variable rates, which fluctuate with the key rate, will be impacted by the change. Thake says that property owners with a variable interest rate will naturally see their rate go down by .25 points.
The central bank says that it feels comfortable making this cut as inflation begins to slowly ease.
“We’ve come a long way in the fight against inflation,” said the Bank of Canada Governor Tiff Macklem on Wednesday morning. “Our confidence that inflation will continue to move closer to the 2 per cent target has increased in recent months.”
Andy Kovacs, a financial planner at Sun Life in Markham, Ont., hopes that this move is indicative of a larger downward trend in interest rates.
More than half of Canadians are concerned that interest rate hikes will impact their ability to engage in the housing market this year, according to Re/Max’s 2024 housing market outlook report. Kovacs says that the rate drop could be the push potential buyers needed to get into the market.
“Higher borrowing costs have slowed people down from getting into the market, and has kept buyers on the sidelines,” says Kovacs. “This could boost a lot of folks back into the housing market.”
And for cottagers who have been tasked with keeping up with rising costs due to home and cottage upkeep over the last few years, Thake agrees this will give owners “a bit more breathing room.”
Thake says that those with variable interest rates should expect to see a decrease in their payment amounts within a month or so.
Is now the time to make the cottage leap?
Depending on your financial situation, now could be a good time to start looking.
“For people who have been prudently saving up, this could be the signal that tips them into entering the cottage market,” says Kovacs.
From a long-term perspective, more buyers looking to enter the market will also have impacts on supply and demand, says Sam Ghany, a broker of record with Re/Max in the Greater Toronto Area. “If you’re in a position to purchase an additional home, get in there sooner rather than later.”
Experts are hopeful that this move will signal a gradual decline in interest rates.
“This is a step in the right direction,” says Thake. “If your dream is to own a cottage, it will bring it that much closer to reality.”
The Bank of Canada is set to make another announcement on the key interest rate on July 24.
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