For the second month in a row, the Bank of Canada has lowered its benchmark interest rate by 0.25% today. The key interest rate is currently at 4.5%.

This is likely in response to key economic indicators like the Canadian consumer price index (CPI) showing that the nation’s inflation rate fell to 2.7%, and the unemployment rate remained elevated compared to last year.

Although this means that various rate-sensitive products like savings accounts and mortgages may see a downward effect, it also could open the doors to an increase in activity in the real estate market. Part of the intent of this rate change is to encourage consumers to borrow and spend more after many months of holding off on these activities. It could possibly mean more demand for loans tied to real estate (including construction and bridge financing).

On the other hand, households that have previously had to use more of their incomes to pay down high-interest debts may now slowly be able to free up more money for other uses.

Couple this with the effect of slowing inflation making prices more affordable, households can now allocate more of their funds to investing and building their wealth rather than seeing the erosion of their net worth.

Although we cannot predict the direction of interest rates, we strongly feel that this is a good time to invest in private lending for the reasons above.

Let us know what you think!