Half of sidelined homebuyers waiting for interest rate cuts to resume their purchase plans

Many Canadians put their home-buying plans on hold for the last two years. Of those who did, 51% say they will return to the market when the Bank of Canada reduces the key lending rate.

Over the past two years, there has been a huge increase in the cost of borrowing. This has forced millions of Canadians to reconsider or readjust their plans to purchase a home.

The Bank of Canada began raising its key lending rate in March of 2022.

Since then 27% of the country’s adult population has been active in the market. However, a recent Royal LePage survey, conducted by Leger, found that many have had to put their search on hold. In total, 56% say they have been forced to postpone their property search because of rising interest rates.

Lower interest rates are a welcome relief for variable-rate mortgage holders. They also help those who have been forced to put off their home-buying plans. However, the 25 basis point decrease announced in June is not enough for most. Among those who have had to postpone a purchase, 18% say they are waiting for a cut of 50 to 100 basis points. Another 23% say they need to see a cut of more than 100 basis points before they will consider resuming their search.

“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,” said Phil Soper, president and CEO, of Royal LePage. “Buyer behaviour is strongly linked to their confidence that the home they want to buy today will not be less expensive tomorrow.

A full 20% of sidelined buyers say they no longer plan to purchase a home. If the BoC’s key lending rate remains unchanged another 12% say they are ready to jump in again.

The most popular mortgage type and term in Canada is a four or five-year fixed-rate mortgage. That’s what almost 45% of prospective buyers intend to do. Just 22% of respondents say they will choose a variable-rate mortgage and 12% say they will opt for a short-term fixed-rate mortgage.

Of those who have postponed their home-buying plans, many are still browsing listings. This gives them a bit of a respite and more time to save for a down payment and apply for pre-approval for a mortgage. Less than 10% have obtained a mortgage pre-approval. Some have completely abandoned their home-buying plans for the time being.

The Bank of Canada’s overnight lending rate currently sits at 4.75%. The next interest rate announcement is scheduled for July 24th.

Royal LePage commissioned Leger to conduct an online survey among 1579 Canadians, 18 years of age or older, via Leger’s online panel, LEO. The data was collected from January 26 to 28, 2024. No margin of error can be associated with a non-probability sample (i.e. a web panel in this case). For comparative purposes, though, a probability sample of 1579 respondents would have a margin of error of ±2.5%, 19 times out of 20.

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