Interest rate cuts have homeowners in Vancouver, Toronto saving

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For those with a variable rate mortgage, last week’s Bank of Canada interest rate cut was welcome relief, but how much Canadians ultimately saved really depends on where they live.

A new report from the real estate website Zoocasa found the average monthly savings for someone with a five-year variable rate mortgage is $155 per month in Toronto and $166.20 in Vancouver.

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The average yearly savings in Toronto and Vancouver amounts to $1,860 and $1,994, respectively.

On the other end, monthly savings amount to just $76.60 for the average mortgage holder in Regina, the most affordable city Zoocasa included in the report.

While the savings might not seem like much in some regions, economists are expecting between two and three more cuts by the end of 2024, which could begin as soon as the next interest rate decision in July.

“A perceived dovish tone suggests the likelihood of a greater number of follow-up moves,” Andrew Grantham, senior economist at CIBC, said in a note last week.

“We continue to forecast a further 25 (basis point) reduction at the next meeting in July, and a total of four cuts (three more after today’s) by the end of the year.”

James Laird, co-chief executive of Ratehub.ca and president of CanWise mortgage lender, agreed that more cuts are likely incoming.

“Usually if there’s one rate cut, more will follow,” Laird said in the Zoocasa report. “Now, Canadians will be wondering where the Bank wants to get to and when, which will be exciting if you are a borrower.”

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If Canada does cut three more times by the end of the year, Canadian variable mortgage rate holders could see monthly savings of more than $500 in some of Canada’s most expensive cities.

The mortgage relief is also expected to open the door for more people to enter the housing market.

A Zoocasa survey found 51 per cent of residents in Canada and the U.S. cite high prices as the main reason they have not bought a home, but that figure could shrink as rates go down.

“With lower lending rates, prospective buyers will be motivated to get off the sidelines, ultimately leading to more sales activity and the potential for an increase in prices,” Zoocasa chief executive Carrie Lysenko said.

“Now is an excellent time to get off the sidelines, before the competition gets too fierce, explore your options and take advantage of the greater negotiating power you have with the current surge in inventory.”

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Amid a global labour shortage, IKEA struggled to keep workers, with each employee who quit costing the retailer about US$5,000 to replace, Bloomberg reports.

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To keep employees happy, IKEA began offering front-line employees salary raises, more workplace flexibility and more technology to make their job easier.

The result? Voluntary attrition (read: quitting) fell by nearly five per cent in just two years, even in an industry known for high turnover. Read more.

• 2:00 p.m.: U.S. FOMC Announcement and Summary of Economic Projections
• 2:30 p.m.: U.S. Federal Reserve Chair Jerome Powell’s press briefing
• 3:00 p.m.: Bank of Canada Governor Tiff Macklem speaks in Montreal
• Data: U.S. Consumer Price Index
• Earnings: Dollarama, Broadcom

While a tax-free savings account is a great way for some Canadians to save money, it is not for everyone. Certified financial planner Jason Heath suggests those with debt, employer matching programs and those looking to buy their first home could be in the position to consider other options. Find out more.

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Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you wondering how to make ends meet? Drop us a line with your contact info and the gist of your problem and we’ll try to find some experts to help you out, while writing a Family Finance story about it (we’ll keep your name out of it, of course). If you have a simpler question, the crack team at FP Answers, led by Julie Cazzin, can give it a shot.

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Today’s Posthaste was written by Ben Cousins, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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