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What the BoC rate cut means for Edmontonians with a mortgage or looking to buy

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Nav Sangha looks at how the most recent Bank of Canada rate cut will impact the local real estate market.

The Bank of Canada (BoC) dropping its key interest rate from 3.25 per cent to 3 per cent could mean good news for Edmontonians with a variable mortgage rate.

“In a variable mortgage rate where your payment goes up and down based on the prime rate, you’re going to save $25.50 depending on the size of your mortgage,” said David Niven, managing partner at Colin Bruce Mortgage Team.

The country’s central bank slashed the key rate to three per cent Wednesday as it projected stronger GDP growth in 2025 if the United States doesn’t get into a trade war with Canada.

For people with a fixed rate, Niven says it’s not so good. Many homeowners assume when the BoC cuts its rate, mortgages across the board will go down - but that’s not the case.

“Just because the Bank of Canada drops one rate, doesn’t mean another rate is going to drop.”

Niven doesn’t think new home buyers won’t see much of a loan reduction either.

“A lot of lenders are sort of in a holding pattern and they’re being cautious with their interest rates waiting to see what happens down in the United States,” Niven added.

Darlene Reid, chair of the Realtors Association of Edmonton, says buyers and investors are waiting as well.

“The rate cut is great but unfortunately, we are seeing a lot of people holding off because of the political uncertainty down south.”

Reid says Edmonton has been a seller’s market over the last year and she expects that to continue with sales going up and inventory going down.

With this recent rate cut, Reid says it may encourage more people to look into buying, but that comes at a price.

“When you wait for that rate to drop, and sure you might be saving 25 basis points on your mortgage, but now you’re in multiple offers with 13 other people and they’re bidding the prices up,” Reid added.

With more bids to fight with, Reid says this will make it more difficult for young people to afford their first home.

“Our goal was to pay off our mortgage. The new generation, their goal is just to be able to get one - and to get one, you need a house to buy and if there’s no houses to buy, it’s a challenge.”

The BoC has dropped its rate 2 per cent since June.

With files from CTVNews.ca