A recent interest rate cut by the Bank of Canada from 3.75% to 3.25% is expected to boost the real estate market and make home purchases more affordable, according to economist Francis Gosselin. While this move may facilitate business growth through accessible financing, concerns about slow economic growth and rising unemployment persist. Gosselin also expressed skepticism about potential tariffs proposed by U.S. President Trump, suggesting they could harm Canadian businesses if enacted.
Positive Impact of Interest Rate Cut on Real Estate
The most recent adjustment to the key interest rate for 2024 brings encouraging news for the real estate sector, according to economist Francis Gosselin. The Bank of Canada has made a notable reduction, lowering the rate from 3.75% to 3.25%. This decision is expected to invigorate economic activity across the country.
“Several prospective buyers in the real estate market were anticipating a significant decrease,” Gosselin shared during an interview on the show Le Bilan. “These consecutive reductions send a clear message that purchasing a home is becoming more affordable.”
Additionally, Gosselin highlighted the potential benefits for businesses looking to expand, invest, or acquire other companies. “With lower rates, financing becomes much more accessible,” he noted, indicating a positive shift in the business landscape.
Concerns Amidst Economic Growth
Despite this positive development, some recent economic indicators are less promising than hoped. Gosselin remarked, “An annualized economic growth rate of 1% is not particularly impressive for Canada, especially when the United States is experiencing robust growth over multiple quarters.”
While the latest interest rate update suggests that Canadians have successfully avoided a recession in 2024, Gosselin pointed out that this does not equate to increased wealth. “The year 2025 is likely to mirror the current year, featuring improved indicators and a resurgence in investment, but genuine growth will take time to materialize,” he predicted.
The economist also expressed concern over the national unemployment rate, which stands at 6.8%, the highest level since September 2021, according to Trading Economics.
Addressing potential threats from U.S. President Donald Trump regarding proposed 25% tariffs, Gosselin remains skeptical about the likelihood of their implementation. “Mr. Trump’s approach often begins with provocative statements that seem extreme,” he explained.
He strongly doubts that such tariffs will come into effect when a new president is inaugurated on January 20. “It seems almost absurd to consider it,” he remarked, although he acknowledged that if these threats materialize, they could have a “devastating” short-term impact on Canadian businesses.
“This would create substantial challenges for many entrepreneurs,” he warned. “Given the current struggles of the Canadian economy, it would represent a double negative effect.” Gosselin estimated that numerous companies could see a decline in production and export capacity ranging from 5% to 50%.
Nonetheless, he believes there would be several exceptions, emphasizing that “Mr. Trump has little to gain by imposing tariffs on Alberta oil, Quebec electricity, and various other goods.” He concluded by urging a cautious approach to these developments, advising, “We should take all of this with a grain of salt.”
For further insights, check out the full interview in the video above.