Measures taken Bank of Canada to cut interest rates The first “green housing” plan in more than four years has been welcomed with open arms in Calgary, but experts don’t expect it to have much of an impact on the city’s already hot housing market.
The Bank of Canada cut its overnight lending rate by 25 basis points to 4.75% on Wednesday, down from 5% where it has been since July 2023.
Curtis Prokopchuk of eXp Realty in Calgary He said that while any relief was welcome, it could actually make the market even hotter than it already is.
“As interest rates go down, prices are likely to go up,” he told Global News.
Prokopchuk noted that home prices have been high over the past few years, and waiting for interest rates to drop isn't always in the best interest of potential homebuyers.
He added that several buyers had been waiting, only to see the price go up by $20,000 to $30,000.
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“Lower interest rates may alleviate this problem to some extent,” Prokopchuk said. “But it will not be enough to offset the impact of higher prices.”
Sheldon Phillips, Mortgage Broker, Enrich Mortgage Group Agree with Prokopchuk.
He said while the recent fall in interest rates would benefit existing variable rate homeowners, the same would not be true for those looking to enter the market.
“It doesn’t help much in terms of a buyer’s market,” he said.
Mr Phillips said lower interest rates would only give people greater purchasing power, and greater purchasing power would put further pressure on sales and prices.
“When everyone’s affordability changes, everyone can afford more stuff,” he noted.
“There is currently a one-month supply of housing. Then supply and demand kicks in and everyone will pay more for the same thing. If they can afford to buy a home now, they should do it now. Waiting does them no good because they end up paying the same price as rates go down and prices go up.”
Phillips added that lower rates might actually help renters because most landlords he knows have variable-rate mortgages.
“With a large number of mortgages coming off the table, there will be less upward pressure on rents.”
The Bank of Canada will announce its next interest rate decision on July 24.
