The U.S. Federal Reserve cut its key rate on Sept. 18 by 50 basis points to a range between 4.75 percent and 5 percent, marking the first U.S. rate cut in more than four years.
Emrul Hasan, an economics lecturer at the University of British Columbia, told The Epoch Times that rate cuts in the United States "always have a direct influence on the Canadian bond market."
If five-year bond yields go up steadily "over days," it means banks will likely be raising their five-year fixed mortgage rates soon. And if those bond yields drop steadily over days, it means banks are "thinking of" lowering their rates, says True North Mortgage.
"As the U.S. drops rates, it allows the Canadian bank to drop rates, which then would lead to lower five-year government bond yields, which will lead to lower mortgage rates," True North Mortgage founder and CEO Dan Eisner told The Epoch Times in an interview.
It may take some time before the impact of the U.S. Federal Reserve rate cut may be visible in Canada, however, says mortgage broker James Harrison.
"We'll continue to see the cost of borrowing for variable-rate mortgages and lines of credit continue to come down," which will have a positive psychological effect on buyers and sellers, Harrison said.
He also expects an increase in house purchases in the new year.
"I think there'll be even more in early 2025 after the new first-time homebuyer and insurable mortgage rule changes come into effect."
Harrison says he has been seeing a "big uptick" in pre-approval applications, which could be an indication of the market becoming more active.
"That's typically a sign that buyers are quite confident and looking to enter the market," he said. "Where you typically see it is in January, at the start of the new year. But to see it in September is, I think, a direct impact of the rate drops we've seen and will continue to see."
At the Bank of Canada's interest rate announcement on Sept. 4, governor Tiff Macklem said further interest rate reductions are "reasonable to expect" if inflation continues to slow, but that the central bank will "take our monetary policy decisions one at a time."