June 13, 2024

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Canadians waiting for Bank of Canada rate cut before buying home

6 min read

Many say they will hold off until 2025 or later

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Those expecting a spring rebound in Canada’s housing market might have to wait longer than they thought.

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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.

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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.

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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 slightly, as not only buyers, but sellers as well, held back, said Robert Hogue, assistant chief economist at Royal Bank of Canada.

“We suspect a standoff between (inflexible) sellers and (budget-constrained) buyers is developing,” said Hogue.

The BMO survey also revealed that while 62 per cent say owning a home is one of their biggest aspirations in life, more than half feel that dream is unattainable.

The majority of those surveyed believe they are making financial progress, but worries about unknown expenses, their overall financial situation and housing costs were causing financial anxiety.

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EV sales
BMO Economics Photo by BMO Economics

Electric vehicles have been making headlines in Canada, with the announcement of Honda Motor Co‘s $15-billion EV and battery manufacturing facility last week. The complex, which will build on Honda’s existing plant in Alliston, Ontario, should produce up to 240,000 vehicles when it opens in 2028.

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But will the demand be there? Erik Johnson, senior economist at Bank of Montreal, shows in today’s chart that EV and hybrid sales are picking up speed in Canada, despite a sluggish start to the year. In 2017, gas and diesel vehicles were nearly 98 per cent of sales; today they are 81 per cent.

“With Honda and Toyota recently announcing investments in the segment, the industry is signalling that affordable battery electric vehicles are likely shaping up to be a key arena of future competition,” said Johnson.

  • Canada Revenue Agency deadline to pay 2023 taxes for most taxpayers. Self-employed Canadians have until June 15.
  • Deputy Prime Minister Chrystia Freeland will provide an update on the government’s economic plan in Ottawa.
  • Statistics Canada will release February figures for gross domestic product today. The agency’s early GDP estimate was a 0.4 per cent rise.
  • United States Federal Reserve’s Federal Open Market Committee begins meeting on interest rates, with decision tomorrow.
  • Environment Minister Steven Guilbeault will attend the G7 Ministers’ Meeting on Climate, Energy and Environment in Turin, Italy.
  • Today’s Data: Statistics Canada will release February figures for gross domestic product today. The agency’s early estimate was a 0.4 per cent rise.
  • Earnings: Cameco Corp, Ivanhoe Mines Ltd, Restaurant Brands Intl, Allied Properties REIT, Molson Coors Beverage Co, 3M Co, McDonalds Corp, The Coca-Cola Co, Amazon.com Inc

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Maintaining your cash flow in retirement is a question that keeps many awake at night. In this case, a woman is planning to join her already-retired husband this year. We asked retirement planner Eliott Einarson to help them plan a strategy that will fit their desired lifestyle. Find out more at FP Investing.

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Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you wondering how to make ends meet? Drop us a line at [email protected] with your contact info and the general gist of your problem and we’ll try to find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course). If you have a simpler question, the crack team at FP Answers led by Julie Cazzin or one of our columnists can give it a shot.

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McLister on Mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Read them here 


Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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