Prospective homebuyers still sitting on sidelines despite rate move

Poll found Canadians still discouraged by high mortgage costs and housing affordability

Prospective homebuyers still sitting on sidelines despite rate move

The Bank of Canada's recent interest rate cut isn't enough to lure back most Canadians who have put their homebuying dreams on hold, according to a new poll.

An Ipsos poll – conducted after the central bank's decision to lower its policy rate by 25 basis points on June 5 – revealed that high borrowing costs continue to deter many Canadians from buying homes.

The BoC's policy rate influences mortgage rates, impacting how much Canadians can borrow and the monthly payments they must make.

According to the survey, 63% of respondents said they would stay on the sidelines of the housing market due to current interest rates. The poll, which included over 1,000 Canadians aged 18 and older, was conducted online between June 7 and June 10.

Among non-homeowners, 6% said a rate cut of less than one percentage point would encourage them to buy a property. Meanwhile, 25% of respondents indicated that they would need interest rates to fall by between one and 3.99 percentage points to consider purchasing a home. An additional 10% said they would require even larger reductions to make homeownership feasible.

Despite the Bank of Canada’s rate cut, a significant portion of Canadians (45%) believe they will not be able to afford a home regardless of how much interest rates drop.

The poll also suggests a lingering pessimism about housing affordability in Canada.  While the number saying homeownership is only for the rich has dipped slightly from 80% in April to 78% now, a significant majority still feels that way.  Similarly, the number of people who have given up on ever owning a home has dropped from 72% to 62%.

One-third of those who already own property expressed concern about their ability to keep their homes due to high mortgage rates.

Regarding future mortgage decisions, 67% of homeowners said they would prefer a fixed-rate mortgage if they had to renew or obtain a new mortgage this year, while 30% would choose a variable rate. This preference reflects the desire for stability in monthly payments amid uncertain economic conditions.

Read next: RBC: Housing market in limbo as Canadians await cheaper mortgages

The Bank of Canada has hinted at further rate cuts this year, but rates remain high for now. It remains to be seen whether these cuts will be sufficient to alleviate the concerns of potential and current homeowners across the country.

The central bank’s next decision on interest rates is scheduled for July 24th.  In the meantime, many Canadians wait to see if housing affordability will improve.

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