Even 50-bps Bank of Canada rate cut could wash over financially stressed consumers, survey suggests

financialpost.com:

Canadians are so financially stressed out that the expected relief from a jumbo-sized rate cut by the Bank of Canada could just wash over them, an ongoing survey of people’s outlook suggests.

The fallout from pandemic-era inflation and sticky higher prices remain “significant pain points for consumers,” John Wright, executive vice-president of Maru Public Opinion, said in a release highlighting households’ outlook for finances and the economy since 2020.

“Even a further 50-basis-point cut in interest rates may not prompt action from many Canadians, who might decide to wait for more favourable conditions, as the burden of down payments and mortgages continues to feel out of reach,” he said.

Canada’s housing market suffered from affordability issues before COVID-19, but those issues have only worsened.

Home prices are 30 per cent higher than in April 2020, Wright said, adding that monthly mortgage payments on a five-year fixed mortgage are 40 per cent higher than in January 2020, citing data from the Canadian Real Estate Association.

In the previous Maru Household Outlook Index survey, it looked like more people were ready to take the plunge into the housing market, possibly buoyed by the Bank of Canada’s telegraphed intention to continue cutting interest rates.

But despite the rate cuts, Wright said people are looking to downsize from their current homes because they can no longer afford their mortgages and are “hoping the rate cut would make their properties more appealing to potential buyers.”

With more interest rate cuts on the way, he thinks homebuyers are pushing their home-buying intentions until after the Bank of Canada’s meetings on Oct. 23 and Dec. 11. They have also possibly pushed back their buying intentions