Will Bank of Canada’s big rate cut wake up ‘sluggish’ housing market?
Global News
The Bank of Canada slashed key interest rates by half a percentage point, leading some experts to say this could spur movement in Canada's 'sluggish' housing market.
The Bank of Canada delivered a big rate cut on Wednesday, slashing key borrowing rates by half a percentage point, and experts said this could help jolt Canada’s “sluggish” housing market.
The central bank’s policy rate now stands at 3.75 per cent. Wednesday’s decision is the fourth consecutive drop in interest rates since June and is the Bank of Canada’s largest rate cut since the global financial crisis in 2009, outside the COVID-19 pandemic.
“We took a bigger step today because inflation is now back to the two per cent target and we want to keep it close to the target,” Bank of Canada governor Tiff Macklem told reporters Wednesday.
Phil Soper, president and CEO of Royal LePage, said the most immediate impact of Wednesday’s rate cut will be felt by those who have variable rate mortgages.
“Activity in Canada’s housing market has been sluggish in many regions due to higher borrowing costs, but today’s more aggressive cut to lending rates could cause the tide to turn quickly. For those with variable rate mortgages – who will benefit from the rate drop immediately – or those with fast-approaching loan renewals, today’s announcement is welcome news indeed,” he said.
Soper added that cuts to the lending rate will mean many homebuyers will “come off of the sidelines.”
“In turn, rising demand will cause home prices to increase more rapidly, eliminating the advantages of lower borrowing costs,” he said, “We expect that an early spring market is on the cards – a pull-ahead trend we’ve seen in previous market turnarounds.”
James Orlando, director of economics at TD Bank, said, “If there’s one thing that a lot of Canadians don’t want is they don’t want housing in Canada to become more unaffordable. It’s already unaffordable right now.”