How will the Bank of Canada's interest rate cut affect Edmonton's housing market?

The Bank of Canada (BOC) announced a cut to the interest rate Wednesday and experts are expecting that will benefit Edmonton's housing market.

Overnight, the interest rate went from 4.25 percent to 3.75 per cent.

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The interest rate affects a number of things across the country and is a method the central bank uses to control inflation.

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

With the interest rate going down, people are expected to take more of an interest in the housing market and Edmonton is primed to be a hot area, 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 that is because of the affordability of Edmonton compared to areas like Toronto or Vancouver. Another factor is that Calgary is becoming more "speculator focused," according to Hill.

"That just means it needs a little bit of time just to cool off, become a bit more balanced," he added. "Where you're going to start to see a lot of the movement on that Edmonton market is probably from outside speculators in 2025, just because of its affordability.

"Which probably isn't amazing for the local market, especially if you're a first time home buyer trying to get in and compete, but it will be good for prices."

Edmonton isn't expected to see immediate results from the rate cut, as that tends to have a "more long-term impact on real estate," according to Melanie Boles, board chair of the Realtors Association of Edmonton.

"We are beginning to see a shift from a hot summer market to a typical cooling-down period as we head into the winter months," Boles said.

"Despite this “cooling off” of the housing market, prices in Edmonton continue to rise due to competitive demand and lower 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 Alexander Gainer, an economist at the University of Alberta.

The 0.5 per cent adjustment was expected and is also the largest rate cut since the start of the pandemic.

The driving force behind the cut is the current inflation rate, which sat at 1.6 per cent in September, below the BOC target of 2 per cent.

"This really reflects that the bank is becoming more and more confident inflation is under control," Gainer said. "There's other indicators that the Canadian economy is slowing down quite a bit, and the BOC said they're 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, worst case scenario, pushing the Canadian economy into recession."

Gainer said the BOC is also trying to toe the line with the interest rate, to avoid house prices climbing too quickly like they did in the pandemic and causing a rise in household debt.

The BOC governing council meets again in December. Economists expect the bank will cut the interest rate by 0.25 per cent then, according to Gainer.

The aim is to slowly get interest rates into a neutral area, where they aren't holding the economy back or stimulating it, added Gainer.

The recent estimate of the BOC's neutral rate is between 2.25 per cent and 3.25 per cent.

Boles is expecting to see the Edmonton housing market pick up again in spring as buyers look to take advantage of further rate cuts.

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