Canada Housing Market

On July 24, 2024, the Bank of Canada lowered its key interest rate by a quarter percentage point to 4.5%. While this move is intended to combat inflation and stimulate economic growth, experts suggest that its immediate impact on the real estate market will be limited.

Modest Rate Cut and Market Expectations

John Lusink, President of Right at Home Realty
John Lusink expressed disappointment with the modest size of the rate cut: “A 0.5 percentage-point drop would have been more impactful. This recent cut is not expected to significantly boost sales; many people are still in a wait-and-see mode.” He believes a larger reduction is necessary to drive noticeable changes in the market.

Buyer Hesitation and Market Confidence

Leah Zlatkin, Mortgage Broker at LowestRates.ca
Leah Zlatkin noted that while the rate cut is a positive development, it is unlikely to dramatically alter the real estate landscape. “Many potential buyers are waiting for further rate decreases to improve their buying power,” she said, highlighting the ongoing hesitation among buyers.

Karen Yolevski, COO of Royal LePage
Karen Yolevski commented on the psychological effects of the rate cut: “The rate cut might slowly bring buyers back into the market, but it won’t cause an immediate rush. It helps build confidence that rates are on a downward trend, which can bolster consumer sentiment.”

Impact on Mortgage Rates

Robert Kavcic, Senior Economist at BMO
Robert Kavcic pointed out that the effect of the rate cut on fixed mortgage rates is limited: “Fixed mortgage rates have already anticipated these cuts. A 0.25 percentage-point reduction in variable rates won’t necessarily make housing more affordable or attract more buyers.”

Penelope Graham, Mortgage Expert at Ratehub.ca
Penelope Graham added that variable mortgage products might appeal to those expecting further rate reductions. “Variable mortgage products are appealing for those who expect rates to continue falling and can handle any unexpected rate changes. The recent cuts provide some relief to those with variable-rate mortgages.”

Future Outlook and Further Cuts Needed

Victor Tran, RATESDOTCA Mortgage and Real Estate Expert
Victor Tran emphasized that the current rate cut is unlikely to stimulate significant market activity. “We may need another 25 to 50 basis points reduction before seeing a noticeable increase in sales,” he said, indicating that additional cuts may be necessary to encourage more buyers to enter the market.

Commercial Real Estate Sector

Adam Jacobs, Head of Research at Colliers Canada
Adam Jacobs offered a perspective on the commercial real estate sector: “The rate cut is a positive sign for the commercial real estate sector. It could make rental developments more feasible, ease pressure on the rental market, and encourage more people to buy or list properties.”

Conclusion

In conclusion, while the Bank of Canada’s recent rate cut to 4.5% is a positive step, experts agree that it may not be sufficient to significantly impact the real estate market. Further reductions in interest rates might be needed to see a substantial increase in market activity, particularly in both residential and commercial real estate sectors. The general consensus is that buyers and investors are likely to wait for deeper cuts before making significant moves.

Sources

BoC rate cut not enough to boost housing market: Experts (thestar.com)

How will the Bank of Canada rate cut impact the real estate market? – BNN Bloomberg