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Two-Year Low: Inflation Decelerates, Bringing Economic Relief

The inflation rate for June 2023 has been announced, and it has decreased to 3.4% from the previous month’s high of 4.4%. This is the lowest that we have seen on inflation in 2 years.

Inflation is the rate at which the general level of prices for goods and services is rising. It’s an important economic indicator that can influence various aspects of the economy, including the housing market. A decrease in inflation, as we’ve seen this month, can have several positive implications.

Firstly, lower inflation can lead to increased purchasing power. When inflation is high, your money doesn’t go as far because the cost of goods and services is higher. With the decrease in inflation, your dollar can stretch a bit further. This is particularly important when considering large purchases, such as a home.

Secondly, lower inflation can influence interest rates. The Bank of Canada uses interest rates as a tool to control inflation. When inflation is high, the Bank may raise interest rates to slow down economic activity. Conversely, when inflation decreases, there may be less pressure to raise interest rates. While the Bank considers many factors in its decisions, the decrease in inflation is a positive sign for those of us keeping a close eye on mortgage rates.

Now, let’s talk about how this relates to the housing market. The cost of buying a home isn’t just about the sticker price. It also includes the cost of borrowing money, i.e., the interest on your mortgage. Lower inflation could potentially ease upward pressure on interest rates, making borrowing more affordable. This is good news for both current homeowners and prospective buyers.

For homeowners, a lower interest rate environment can reduce the cost of borrowing against your home equity, whether it’s for a renovation, investment, or other purposes. For prospective buyers, lower interest rates can make mortgage payments more affordable, which could make homeownership more attainable.

In conclusion, the decrease in inflation is positive news for the Canadian economy and the housing market. As always, we will continue to monitor economic indicators and keep you informed about changes that could impact your financial decisions.

Please don’t hesitate to reach out if you have any questions or would like to discuss how these economic developments could impact your personal situation. We are here to help!

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