String of rate cuts not enough to 'resuscitate' housing market, experts say
On Wednesday, the Bank of Canada cut its benchmark interest rate by 25 basis points for the third consecutive time, bringing it down to 4.25 per cent. Economists are predicting further interest rate cuts by the central bank for the remainder of the year and into 2025. Here’s what experts have to say about the impact of the cuts on Canada’s real estate markets:
While it is good news that the Bank of Canada is continuing to lower its overnight rate, the effect on the housing market will not likely be seen for some time, said Victor Tran, Rates.ca’s mortgage and real estate expert.
For every 25-basis point drop, a homeowner with a variable-rate mortgage can expect a reduction of approximately $15 in monthly payments per $100,000 of mortgage, according to insurance comparison website Rates.ca.
Tran said fixed-rate mortgage holders will not see the effects of any mortgage rate decreases until they renew.
He noted that housing market activity in major urban centres like Toronto and Vancouver has not picked up nearly as much as expected in recent months. Despite the previous rate decreases, mortgage rates remain quite high, he added.
Even a drop of a full percentage point from current mortgage rates would not result in a significant increase in buying power given persistently high home prices, he explained.
“Mortgage rates have not come down nearly fast enough to stimulate much activity in the housing market. It’s just not affordable for people,” Tran said. “It will take a significant decrease in mortgage rates before we see a return of housing market activity.”
Considering the national average price of a home is approximately $700,000, a single percentage point decrease would likely not make a significant difference in a
Read more on financialpost.com
