Posthaste: Sidelined homebuyers just waiting for the Bank of Canada to cut rates
The swift rise in Bank of Canada interest rates over the past two years has forced millions of potential homebuyers to the sidelines.
A recent Royal LePage survey found that 56 per cent of Canada’s adult population say they have postponed their property search because of higher interest rates.
Among them, 51 per cent say they will jump back into the market if interest rates reverse — but by how much?
For 10 per cent all it would take is a 25 basis point cut, the survey found. Eighteen per cent say they are waiting for a cut of between 50 and 100 bps and 23 per cent need to see a reduction of more than 100 bps before they will return to the market.
A fifth, 20 per cent, of sidelined buyers say they no longer plan to buy a home.
The big question for many then is when interest rates will start to go down. The Bank of Canada announces its rate decision next Wednesday on March 6, but most economists think the first cut won’t come until June.
Olivia Cross of Capital Economics expects the Bank will use its press conference next week to emphasize the message that its restrictive policy needs more time to work.
Up until last week there was a clear case for holding, with readings on economic growth and employment both coming in stronger than expected. But consumer price index data for January muddied the waters, showing the inflation rate falling back within the central bank’s target range.
If shelter inflation, which is exacerbated by higher interest rates, is excluded, than inflation is lower than its average in 2019, said Cross.
The Bank of Canada, however, still has reason to be patient, she said. Though January’s inflation numbers were an improvement they followed two months of acceleration and policy makers will likely want
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