Many Canadians who have been locked out of the housing market since the Bank of Canada started raising interest rates nearly two years ago are re-entering the fray, waiting for policy rates to be lowered.
The Royal Lepage report, based on a Leger poll released on Tuesday, found that since the Bank of Canada began raising interest rates in March 2022, more than a quarter (27%) of Canadians are “not in the housing market.” It shows that they are actively participating.
However, more than half (56%) of prospective homebuyers polled have put off looking for a property as rapid central bank tightening cycles gradually increase borrowing costs and limit house price growth. I answered that I had to. .
The Bank of Canada’s policy interest rate has been 5.0% since July 2023, the highest level in 23 years. Central bank policymakers have indicated that as long as inflation continues to fall as expected, the benchmark interest rate has likely peaked and the next step is likely to be a rate cut.
More than half of buyers and sellers who said their plans were on hold indicated their intention to begin easing once the easing cycle begins, according to the Royal Lepage survey.
About 10% said they would be able to restart the search if their numbers dropped by even a quarter of a point. Almost one in five respondents (18%) said they were waiting for a 50-100 basis point cut, while 23% said they needed a bigger cut before returning to the market.
One in five prospective buyers said they were no longer considering purchasing real estate, and 12% said their purchase plans were not affected by the Bank of Canada’s interest rate path.
About one in 10 Canadians plans to buy a home next year, and nearly half of respondents plan to buy a home within the next five years, according to another NerdWallet Canada survey released last week. The answer is yes.
Spring marks ‘pivotal moment’ for housing backlash
There are signs of pent-up demand ahead of Canada’s traditionally busy spring housing market.
Royal Lepage CEO Phil Soper said in a statement Tuesday that the Bank of Canada’s suspension of interest rate hikes in spring 2023 has boosted consumer confidence, leading to increased sales activity around this time last year. Stated.
Get financial news and insight delivered to your inbox every Saturday.
“We expect a similar wave of buyer demand to emerge as the first indication that a long-awaited rate cut by the central bank is on the horizon,” Soper said in a statement.
“Buyer behavior is strongly tied to confidence that the homes they want to buy today will not be cheap tomorrow. We expect spring to be that key moment.”
Some forecasters are calling for the Bank of Canada to start cutting interest rates in April to boost Canada’s struggling economy, but the central bank has said it expects inflation to continue falling well into 2018. Some observers say that the central bank is likely to start cutting interest rates in June or July. The target is 2%.
The central bank itself has not said whether or when it will cut interest rates, but Governor Tiff Macklem told reporters last month that discussions at the Bank of Canada have shifted from debates about whether interest rates are high enough. He said the discussion has now shifted to how long the central bank needs to continue lowering interest rates. Interest rates at current levels.
The annual inflation rate in January was much lower than expected at 2.9%, prompting calls for an early interest rate cut.
Comparison site LowestRates.ca said in a release Tuesday that it has seen a “significant increase” in mortgage pre-approval inquiries in recent weeks.
Leah Zlatkin, a mortgage broker and expert at LowestRates.ca, said in a statement that fixed-rate mortgages have fallen in recent weeks on expectations that the Bank of Canada will lower interest rates. .
He said some buyers may be flooding into the market now to survive “the expected rush when rates actually go down.”
“This spring market will be very busy,” Zlatkin said.
Royal Lepage also indicated that pre-approval requests through its lending partners were on the rise heading into the spring.
According to the survey, 44% of part-time buyers said they planned to take out a four- or five-year fixed-rate mortgage, while 12% said they would choose a shorter term. About 22% said they would choose a variable rate mortgage.
Royal LePage commissioned Leger to conduct an online survey of 1,579 Canadians aged 18 and over through Leger’s online panel LEO. Data was collected from January 26 to 28, 2024. Nonprobability samples have no margin for error.
© 2024 Global News, a division of Corus Entertainment Inc.
#Spring #pivotal #time #housing #market #CEO #Royal #Lepage #National #Globalnews.ca