
Residential Market Commentary - Rates fall. Market slow to react.
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- Sep 10, 2024
- First National Financial LP
As expected the Bank of Canada has knocked another quarter of a percent of its trendsetting policy rate. It is the third straight reduction and the rate now stands at 4.25%.
Bank of Canada Governor Tiff Macklem has signalled that further rate cuts are likely (but not guaranteed). That is widely seen as good news for variable rate mortgage holders. But it also appears that it is being interpreted as a caution signal by potential buyers.
Rates remain relatively high. Analysts have said it will likely take a reduction of a full percentage point to get buyers moving back into the market again, and we are not quite there yet. So, many seem content to remain on the sidelines and wait for further rate cuts.
Buyers do remain interested, though. Well known market watcher Robert McLister noted in a recent newspaper column that Google searches for the topic “mortgages” have hit their highest level since the pandemic.
Affordability remains a key concern. The Bank of Canada’s Macklem says, despite a recent softening in the market, prices could actually rise. The current decline in prices coupled with falling interest rates could rekindle demand which, in turn, could reverse the direction of home prices.
In its last quarterly forecast, published in July, the Canadian Real Estate Association estimated the national average home price would hit $694,393 this year, and $729,319 next year.
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