Posthaste: Canadians put off plans to buy a home until the Bank of Canada cuts rates
Those expecting a spring rebound in Canada’s housing market might have to wait longer than they thought.
A survey by the Bank of Montreal revealed this week that 72 per cent of aspiring homeowners are waiting for the Bank of Canada to cut interest rates before buying.
Canadians opting to wait for rate relief are up 4 per cent from 2023 amid growing concerns about the cost of living, inflation and their financial situation, said BMO.
Among the almost 40 per cent planning to buy a home in the near future, only 13 per cent plan to buy in 2024 and 26 per cent plan to buy in 2025 or later, the report said.
Canadians are expecting a rate cut in the second half of this year, and that should bring some buyers back to market and firm up sales, said Robert Kavcic, senior economist at BMO Capital Markets.
“But rates have a long way to fall still before affordability is restored to recent norms,” he said.
The Bank of Canada held its benchmark interest rate at five per cent this month, but signalled that a cut in June or July was possible. Forces at home and abroad, however, could delay that decision.
Though inflation has slowed in Canada in recent months, the central bank will be closely watching consumer price index data that comes out May 21 ahead of its June 5 meeting.
Stubbornly high inflation in the United States is also a concern. Predictions for a Federal Reserve rate cut have been pushed back to December or later and a gap between policy rates would put pressure on the Canadian dollar, running the risk of reigniting inflation.
Even if the Bank of Canada makes its first cut in June, policy makers have stressed that any moves downward will be gradual.
March home sales in Canada were flat and the MLS Home Price Index fell
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