A Bank of Canada interest rate cut could give Canada’s slow housing market a jolt, as prospective buyers gain confidence that borrowing costs are on the decline.
Since mid-2022, activity in the country’s real estate market has been mostly weak with sales consistently below the 10-year average. Homeowners have had to deal with the highest borrowing costs in years and would-be buyers have been cautious about making purchases because of uncertainty over the direction of interest rates.
A survey conducted earlier this year by Royal LePage found that around half of the people who put their home-buying plans on hold over the past two years intend to return to the market when interest rates start to fall. Christopher Alexander, president of Re/Max Canada, said a quarter-point rate cut will give some buyers “breathing room but not enough to bridge the affordability gap.”
Fixed-rate mortgages are priced off longer-term bond yields, such as three- or five-year Government of Canada bonds, rather than directly off the Bank of Canada’s policy rate.
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