Over the past two years, the rising cost of borrowing has led many Canadians to reconsider their plans to buy a home.
A recent survey by Royal LePage, conducted by Leger, reveals that since the Bank of Canada started increasing its key lending rate in March 2022, 27 per cent of adults in the country have been active in the housing market. However, more than half of them (56 per cent) have had to delay their property search due to the surge in interest rates.
Over half surveyed will continue their home search if interest rates decrease
As the rate of inflation has moderated, nearing the desired 2 per cent target, it’s anticipated that the Bank of Canada will implement its first cut to the overnight lending rate later this year — welcomed news for variable-rate mortgage holders and those who have had to postpone their homebuying plans.
51 per cent of those who delayed their purchase say they’ll resume their search if interest rates decrease. Specifically, 10 per cent would restart their search with a 25-basis-point reduction, 18 per cent await a cut of 50 to 100 basis points and 23 per cent require a cut of more than 100 basis points before reconsidering.
“Buyer behaviour is strongly linked to confidence that the home they want today won’t be less expensive tomorrow”
Phil Soper, president and CEO of Royal LePage, weighs in: “Following the first rate hold by the Bank of Canada in March of last year, we saw an immediate surge of activity in the market as consumer confidence strengthened. I expect a similar wave of buyer demand at the first indication that highly-anticipated cuts by the central bank are on the horizon.
Buyer behaviour is strongly linked to their confidence that the home they want to buy today will not be less expensive tomorrow. We expect the spring will mark that pivotal moment.”
65 per cent of sidelined buyers remain engaged in the homebuying process
Of those who plan to get back into the market when interest rates go down, 44 per cent think they will get a four or five-year fixed rate mortgage, while half the respondents (22 per cent) believe they’ll choose a variable-rate mortgage.
Despite the rate hike’s impact, 65 per cent of sidelined buyers remain engaged in the homebuying process. While some are casually browsing listings (39 per cent) or continuing to save for a down payment (19 per cent), others have applied for (12 per cent) or obtained (7 per cent) a mortgage pre-approval. However, 26 per cent have temporarily abandoned their homebuying plans.
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