Despite two recent interest rate cuts by the Bank of Canada, the real estate market remained stubbornly soft. New listings have been on the rise, but with rates still on the high side and home affordability issues, buyers have been slow to purchase. However, with September's trifecta of bullish mortgage events: "First, Ottawa announced a bombshell loosening of mortgage insurance rules. Second, inflation stunned economists by undershooting the two per cent target. Third, the United States Federal Reserve threw a party for the markets with a jumbo rate cut... [these events] should give real estate a shot in the arm by the first quarter [of 2025] or before," says Robert McLister, mortgage strategist.
The mortgage insurance rule changes are particularly significant, allowing insured mortgages on homes up to $1.5 million and 30-year amortizations for first-time buyers.
Lower inflation gives the Bank of Canada room to continue cutting rates, improving affordability further.
The Fed's rate cut puts downward pressure on Canadian bond yields, which could lead to lower fixed mortgage rates.
Together, these developments represent the most favorable shift in market conditions in over two years.