With the Bank of Canada (BoC) cutting rates, borrowers face a critical decision: lock in a fixed rate now or wait for further rate reductions? The right choice depends on multiple factors, including how quickly rates fall, economic uncertainty, and your personal financial situation.
Let’s break down whether it’s better to act now or wait.
1. The Case for Locking In Now
✅ Fixed rates have already dropped from their peak in 2023-2024.
✅ More borrowers entering the market could push home prices higher.
✅ Uncertainty around inflation and global trade (including new U.S. tariffs) could slow down future cuts.
📌 Best move:
- If you value payment stability, locking in a short-term fixed rate (1-3 years) now can hedge against potential rate volatility.
- If you’re buying soon, locking in a rate before demand increases may be wise.
2. The Case for Waiting
🔹 The BoC has only started cutting rates, meaning more reductions are likely.
🔹 Variable-rate mortgages will become cheaper as cuts continue into 2025.
🔹 Fixed rates could fall further, especially if the U.S. follows with rate cuts.
📌 Best move:
- If you’re comfortable with some risk, a variable-rate mortgage could become the cheaper option in the long run.
- If you’re renewing soon, waiting until mid-to-late 2025 might get you a better fixed rate.
3. Other Factors to Watch Before Deciding
📌 U.S. Federal Reserve Policy: If the Fed delays cuts, it could slow down BoC rate cuts to avoid weakening the Canadian dollar too much.
📌 New U.S. Tariffs: Higher costs for steel, aluminum, and oil could increase inflation, possibly delaying deeper rate cuts.
📌 Housing Market Activity: If more buyers return to the market, home prices could increase faster than rates fall—making waiting a risky move.
Conclusion
📉 Lock in now if you prefer stability or fear rising home prices.
📊 Wait if you can handle short-term uncertainty for potential long-term savings.
📌 Next week: We’ll discuss what falling rates mean for the housing market and if prices will rise again.