The interest rate cut should help Edmonton’s real estate market

The Bank of Canada (BOC) announced an interest rate cut on Wednesday, and experts expect that to benefit Edmonton’s real estate market.

Overnight, the interest rate went from 4.25% to 3.75%.

The interest rate affects many things across the country and is a method used by the central bank to control inflation.

One of the main things that affects the rate is borrowing money for purchases such as houses or vehicles.

With interest rates falling, people are expected to take more interest in the housing market and Edmonton is poised to be a hot spot, according to mortgage broker Andy Hill.

“Edmonton is probably poised to be one of the best real estate markets in the country next year,” Hill said.

Part of this is due to Edmonton’s affordability compared to areas like Toronto or Vancouver. Another factor is that Calgary is becoming more “speculator-focused,” according to Hill.

“It just means he needs a bit of time to cool off, to be a bit more balanced,” he added. “Where you’re going to start to see a lot of the movement in this Edmonton market is probably from outside speculators in 2025, just because of the affordability.

“Which is probably not surprising for the local market, especially if you’re a first-time home buyer trying to get in and compete, but it’s going to be good for prices.”

Edmonton is not expected to see immediate results from the rate cut, as it tends to have a “longer-term impact on real estate,” according to Melanie Boles, chair of the board of the Association of Realtors of Edmonton.

“We’re starting to see a shift from a hot summer market to a typical cooling period as we head into the winter months,” Boles said.

“Despite this ‘cooling’ of the housing market, prices in Edmonton continue to rise due to competitive demand and reduced inventory, even in the face of several recent interest rate cuts.”

The BOC usually adjusts the interest rate by 25 basis points at a time, according to University of Alberta economist Alexander Gainer.

The 0.5 percent adjustment was expected and is also the biggest rate cut since the start of the pandemic.

The driver of the cut is the current inflation rate, which stood at 1.6% in September, below the BOC’s target of 2%.

“This really reflects that the bank is increasingly confident that inflation is under control,” Gainer said. “There are other indicators that the Canadian economy is slowing quite a bit, and the BOC said they are now more focused on making sure the economy doesn’t slow down too much.

“They don’t want to risk unemployment rising too quickly or, in the worst case scenario, pushing the Canadian economy into recession.”

Gainer said the BOC is also trying to get over the line with interest rates, to prevent home prices from rising too quickly as they did during the pandemic and causing household debt to rise.

The BOC’s governing council meets again in December. Economists expect the bank to cut interest rates by 0.25 percent, according to Gainer.

The goal is to slowly bring interest rates into a neutral zone, where they neither slow the economy nor stimulate it, Gainer added.

The BOC’s recent neutral rate estimate is between 2.25 and 3.25 percent.

Boles expects Edmonton’s real estate market to pick up again in the spring as buyers look to take advantage of the new rate cuts.

With files from CTV News Edmonton’s Nav Sangha, Nicole Lampa and Nahreman Issa