$2.1 Trillion Canadian Mortgage Market Poised for Growth as Bank of Canada Rate Cut Sparks New Opportunities for Pineapple

Toronto, Ontario--(Newsfile Corp. - July 25, 2024) - Pineapple Financial Inc. (NYSE American: PAPL), Canada's mortgage fintech leader, with an extensive network of partner brokerages and agents throughout Canada, announced today the Bank of Canada (BoC) reduced its benchmark interest rate by 25 basis points to 4.5%.

This marks the second consecutive rate cut in the current cycle and signifies a crucial shift aimed at stimulating economic activity amid a cooling inflation environment. This rate reduction is particularly noteworthy as it follows nearly ten months of elevated rates and over two years of restrictive policy that had put significant pressure on the Canadian mortgage market. Governor Tiff Macklem's emphasis on a "gradual" approach to further rate reductions reflects a deliberate strategy to improve borrowing conditions after a prolonged period of tight monetary policy. This shift not only demonstrates the BoC's responsiveness to changing economic conditions but also signals a pivotal turning point that could rejuvenate mortgage demand and housing activity.

High interest rates have exerted considerable pressure on Canadian mortgage holders, primarily due to the short-term nature of Canadian mortgages. Typically, mortgages have terms of 1 to 5 years, with rates resetting upon maturity. This has led to many Canadians facing higher rates during recent renewals. With approximately 76% of the $2.1 trillion mortgage market set to mature by the end of 2027, the recent interest rate cut offers significant relief and presents a substantial opportunity for mortgage providers like Pineapple. For example, a recent analysis shows that with the average home price in Canada at $696,179, a rate cut of 0.25% could reduce monthly payments by about $95 for a borrower with a 25-year amortization and a five-year variable rate mortgage dropping from 5.7% to 5.45%. This translates to nearly $200 in savings over the past two months, directly benefiting Canadian homeowners.

The Canadian mortgage market is particularly distinctive due to its short-term nature, with around 60% of new mortgage originations being for 3 to 4-year fixed-rate terms. This structure leads to frequent renewals and regular opportunities for mortgage providers. Pineapple's advanced data analytics, artificial intelligence customer servicing tools are designed to maximize retention and repeat business, positioning us to fully leverage these favorable market dynamics. The BoC's rate cut led to banks lowering their prime rates from 6.95% to 6.7%, thereby easing the cost of borrowing and potentially reducing rates on variable mortgages and lines of credit [Yahoo Finance Canada, 2024]. This could prompt a broader decline in interest rates across various mortgage products, benefiting borrowers with both fixed and variable-rate mortgages.

Looking ahead, CREA projects a robust housing market recovery in 2025, with property sales anticipated to reach 501,902 and average prices climbing to $729,319 [CREA, 2024]. This growth underscores the potential for increased refinancing as existing homeowners seek to benefit from lower rates and for new home purchases driven by enhanced affordability. Additionally, Canada's population is expected to grow by over 400,000 new residents annually due to immigration targets [Government of Canada, 2024]. This demographic expansion will significantly boost housing demand, further driving market activity. Lower interest rates will enhance mortgage affordability, facilitating easier market entry for new buyers and enabling current homeowners to upgrade their properties.

Pineapple is exceptionally well-positioned to capitalize on these evolving market dynamics. Since the BoC began increasing rates in March 2022, we have successfully added 506 users to our platform, reflecting the resilience and appeal of our solutions even in a challenging rate environment. With the recent rate cuts, we anticipate accelerated growth in our user base and revenue. Our innovative platform, equipped with real-time data insights, empowers mortgage brokers to offer superior customer options, streamline processes, and drive increased business. These advancements are critical for capturing a larger share of the renewal and refinancing markets and align with our long-term growth strategy.

The Bank of Canada's rate cut represents a transformative moment for the Canadian mortgage market. It creates substantial opportunities for growth, particularly for companies like Pineapple that are strategically positioned to navigate and benefit from these changes. As the market rebounds, Pineapple is set to leverage our advanced tools and insights to drive significant value for our shareholders and contribute to the broader economic recovery.

Sources:

1. Yahoo Finance Canada Impact of BoC Rate Cuts.
2. Canadian Real Estate Association (CREA) 2024 Housing Market Forecast.
3. Government of Canada Immigration Targets.

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About Pineapple Financial Inc.

Pineapple Financial Inc. is an award-winning fintech and leading Canadian mortgage brokerage network, focusing on both the long-term success of agents and brokerages, as well as the overall experience of homeowners. With approximately 700 brokers within the network, Pineapple creates cutting-edge cloud-based tools and AI-driven systems to enable its brokers to help Canadians realize their dream of owning a home. Pineapple is active within the community and is proud to sponsor charities across Canada to improve the lives of fellow Canadians.

Forward-Looking Statements

Certain statements in this announcement are forward-looking statements, including, but not limited to, the Company's proposed Offering. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company's current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs, including the expectation that the Offering will be successfully completed. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "is/are likely to," "potential," "continue" or other similar expressions. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations that arise after the date hereof, except as may be required by law. These statements are subject to uncertainties and risks including, but not limited to, the uncertainties related to market conditions and the completion of the initial public offering on the anticipated terms or at all, and other factors discussed in the "Risk Factors" section of the registration statement filed with the SEC. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company's registration statement and other filings with the SEC. Additional factors are discussed in the Company's filings with the SEC, which are available for review at www.sec.gov.

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