The Canadian real estate landscape is brimming with — depending on who you are — hopes and fears about next week's Bank of Canada (BoC) announcement.

Several reasons have led experts to predict a quarter-point rate cut from the central Bank on July 24. This would mark the second cut in more than four years.

After six long rate holds at five per cent (since July 2023), the first quarter-point cut was announced on June 5.

Recent inflation data (three per cent) from the U.S. shows promise for an interest rate cut in our southern neighbour — an effect that could trickle to Canada.

Canadian inflation data for June showed that the Consumer Price Index (CPI) rose only 2.7 per cent, bringing the BoC closer to its two per cent target.

Last week, before Canada's CPI data came out, Penelope Graham, mortgage expert at Ratehub.ca, said that the U.S. numbers give Canadians "further reassurance that inflation is trending in the right direction."

"While the BoC has already made its first rate cut ahead of the U.S. Federal Reserve, the rising likelihood the American central bank will be in the position to do so soon will support further downward movement on rates in Canada without the risk of shocking our currency," she said over email.

Now, Graham is even more optimistic about a rate cut.

"The Bank of Canada has been clear that they're taking a data-dependent approach with their rate decisions, and the latest economic reports — such as June CPI and consumer surveys — have cemented high expectations of another quarter-point cut on July 24," she told Thursday.

"Inflation easing in the U.S. has also opened the door for American rate cuts as early as September. This provides the Bank of Canada further assurance that it can continue to cut rates without risks to our currency or further sparking inflation."

How the BoC rate cut could affect your mortgage

Graham noted that bond markets have responded positively to inflation reports and growing optimism that central banks can cut rates. As a result, some lenders have lowered their fixed mortgage rates, and "more discounts are likely should investor sentiment persist."

Though highly awaited, the June 5 cut was not the biggest cause for celebration. Graham said its impact on housing markets has been minimal.

"The latest national real estate data indicates a short-term increase in sales in June. However, most buyers are clearly waiting for rates to lower further before returning to the market. This has prompted the Canadian Real Estate Association (CREA) to revise its forecast for this year and next to account for slower buyer demand," she shared.

If a 25-basis-point decrease happens on Wednesday, here's what happens to a hypothetical homeowner.

This homeowner put a 10 per cent down payment on a $696,179 home (CREA average for June prices) with a five-year variable rate of 5.70 per cent amortized over 25 years (total mortgage amount of $645,984). They have a monthly mortgage payment of $4,019.

If the Bank of Canada announces a 25-basis-point rate decrease, their variable mortgage rate will decrease to 5.45 per cent, and their monthly payment will decrease to $3,924.

This means that, per Ratehub.ca's mortgage payment calculator, the homeowner will pay $95 less per month, or $1,140 less per year, on their mortgage payments.

Who does a rate cut help?

The expert added that mortgage rates are trending lower overall. She believes it's a great time to rate shop for those seeking pre-approval.

"This secures their rate for up to 120 days and protects them in case rates unexpectedly rise in the near future," the expert advised.

"While it may be tempting to get a variable mortgage rate when cuts seem likely, it's important to take your personal risk tolerance and financial situation into account," she stated. "If we've learned anything from the BoC in the last few years, it's that nothing is certain when it comes to rate direction."

Who does a rate cut hurt?

Though most Canadians, especially mortgage borrowers and aspiring homeowners simply looking to buy for residential purposes, could reap the benefits of expected rate cuts, not everyone will welcome it with gleaming positivity.

"It's not a cheerful scenario for passive investors and savers whose returns fluctuate with Canada's prime rate," Graham commented. "Those with Guaranteed Income Certificates (GICs) and high-interest savings accounts will see their earnings lower should the Bank of Canada implement a cut this month."

Want to keep up with BoC updates and commentary? There are four announcements left for 2024. Tune in on these dates.