On Wednesday, the Bank of Canada cut its benchmark interest rate by 25 basis points for the second time this year, bringing it down to 4.5 per cent, its lowest since April 2023. The move was widely expected by economists, who are forecasting further cuts through 2024 and possibly into next year. Here’s what experts have to say about the impact of the cuts on Canada’s real estate markets:

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Not enough to help homebuyers: Nerdwallet Canada

Just as the central bank’s last 25-basis point rate cut did little to move the housing market, this one probably won’t either, says Clay Jarvis, Nerdwallet Canada’s mortgage and real estate expert. An overnight rate of 4.5 per cent is unlikely to unleash homebuyers’ pent-up demand, he said.

The overnight rate only impacts variable mortgage rates, which should decline by 25 basis points in the next 24 hours, and while variable rates will get a little cheaper, they’ll still be significantly higher than the lowest fixed rates, Jarvis said. Even with the reduction, variable rate mortgages at Canada’s biggest banks will still be north of six per cent, and getting approved for one would require passing a stress test at eight per cent. Such a high qualifying rate could significantly reduce the amount a borrower is approved for, he noted.

Fixed mortgage rates, which remain much lower than variables, are offered for well below five per cent. But those rates haven’t been low enough to get the market moving, said Jarvis. Until variable rates fall by at least another one per cent, they won’t provide a more affordable option than what’s already available, he added, noting that this might require another four or five Bank of Canada rate cuts.

Could offer new optimism: Ratehub.ca

Penelope Graham, mortgage expert at Ratehub.ca, said those who’ve stuck it out so far with variable rates are being rewarded further today, as they’ll see their monthly payments reduced again or more of their payment go toward their principal.

Yet, it remains to be seen whether this second cut will be the incentive homebuyers need to re-enter the housing market as borrowing costs remain restrictively high, Graham noted. But with a slight uptick in sales as a result of the June rate cut, today’s decrease could offer new optimism and stoke real estate demand.

According to Ratehub.ca’s mortgage payment calculator, today’s 25-basis point cut would lower the variable mortgage rate of a home priced at the average $696,179 to 5.45 per cent. This means that the homeowner will pay $95 less per month or $1,140 less per year on their mortgage payments on a 5-year variable rate of 5.70 per cent amortized over 25 years.

Expect lower monthly payments: CPA Canada

Canadians with variable-rate mortgages can breathe a sigh of relief, expecting lower monthly payments, while those with fixed-rate mortgages should also see the benefits if the downward trend continues come renewal time, said Chartered Professional Accountants of Canada. For Canadians whose top priority is saving to buy a home, the lower rates will significantly reduce the cost of borrowing.

‘A slight boost’: Royal LePage

A second cut to the overnight lending rate indicates a concrete signal from the Bank of Canada that the economy is moving in the right direction, which many hopeful buyers have been waiting for, said Karen Yolevski, chief operating officer of Royal LePage Real Estate Services Ltd.

With mortgage qualification thresholds continuing to come down, sidelined buyers may have the confidence they need to make their return to the housing market, she said. Yolevski added that she expects the rate cut will prompt a slight boost in activity in the short-term, followed by more robust buyer demand in the fall.

In the meantime, she said that some much-needed inventory has been building in major markets over the last few months, giving buyers more options to choose from. In addition to lower rates, this may also encourage more buyers to re-enter the market in the near future.

‘A bit more breathing room’: Rates.ca

For every 25-basis point drop, a homeowner with a variable-rate mortgage can expect to pay approximately $15 less per $100,000 of mortgage in monthly payments, according to insurance comparison website Rates.ca.

It said that the rate cut comes as many housing markets across the country are experiencing slow sales and a dip in house prices, with home sales activity dropping more than nine per cent year-over-year in June.

Victor Tran, Rates.ca’s mortgage and real estate expert, said this decrease, combined with last month’s rate cut, will provide a bit more breathing room for homeowners with floating variable-rate mortgages.

However, Tran noted that in terms of the broader housing market, the rate cut isn’t likely to spur much activity as many household budgets are still too tight and buyers are willing to wait.

“We would likely need to see another 25 to 50 basis point decrease before there is a significant uptick in sales activity,” Tran said.

‘A step in the right direction’: Canadian Mortgage Brokers Association – B.C.

The Canadian Mortgage Brokers Association – British Columbia said it views the back-to-back cuts as a positive step towards alleviating the financial pressure on mortgage holders, borrowers and first-time homebuyers across B.C. Despite no significant changes to fixed mortgage rates in the short term, the variable rate mortgages and home equity lines of credit will benefit from the drop as the prime lending rate decreases, which is positive news for borrowers, it said.

“Across the province, mortgage holders and borrowers are in dire need of relief,” said Rebecca Casey, president of CMBA-BC. “We are optimistic that today’s announcement will continue to ease the financial burden on homeowners and homebuyers, while also empowering first-time buyers.”

The group said the announcement is a step in the right direction to encouraging a robust housing market and stability for consumers.

‘Two in a row with more to go’: CIBC

Avery Shenfeld, chief economist at CIBC Capital Markets, said mortgage interest, which is one of the sources of pressure tied to inflation, will ease as the central bank lowers the policy rate. The much anticipated quarter point cut opens the door to a further cut in September, he said.

• Email: dpaglinawan@postmedia.com

Want to know more about the mortgage market? Read Robert McLister’s new weekly column in the Financial Post for the latest trends and details on financing opportunities you won’t want to miss.

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