A growing number of potential homebuyers are delaying their decision to purchase homes, largely influenced by the anticipation of further interest rate cuts from the Bank of Canada, according to mortgage broker Ron Butler.
In a recent interview with BNN Bloomberg, Butler noted that many buyers are waiting in hopes that interest rates will decrease further, while others are holding out for potential drops in home prices.
“There are homebuyers thinking: ‘More rate cuts might come, I’ll wait,’” said Butler, of Butler Mortgage. “At the same time, some are hoping prices will decline too, leading to a ‘wait-and-see’ approach that has slowed market activity.”
The Bank of Canada recently reduced its overnight lending rate to 4.25%, marking its third rate cut in a row. The central bank has indicated the possibility of further reductions, depending on inflation trends. This follows a series of rate hikes in the previous year, with the rate peaking at 5% in July.
Despite these changes, uncertainty remains in the housing market. Butler highlighted that sellers, particularly those looking to upgrade to larger homes, face challenges in predicting how much they can sell their current properties for in an unpredictable market.
“If you’re planning to buy a larger home, you can’t be certain about the price you’ll get for your existing property,” Butler explained. “We experienced over a decade where home prices steadily increased, making it easier to predict sale prices, but that’s no longer the case.”
Job market uncertainty is another factor contributing to hesitation among buyers. Many Canadians are uncertain about their job security, which reduces their willingness to invest in property.
“When people are worried about their jobs, buying a new home becomes less appealing,” Butler said.
Butler also pointed out that the condo market has been under strain, with falling prices and slowing sales. He emphasized that speculative investors have largely withdrawn from this sector due to current market conditions.
“We’re not seeing any investors in the condo market,” Butler noted. “In the next two years, around 60,000 units are expected to come onto the market due to previous delays and significant development activity five to six years ago. These units are now facing considerable price pressure.”
The situation presents a contradiction to the widespread calls for more housing supply. According to Butler, there may have been an overemphasis on smaller, investor-driven units that don’t meet the broader housing needs of the population.
For those still considering entering the housing market, Butler suggested that variable-rate mortgages remain the most viable option during this period of uncertainty.
“Variable rates are likely to decrease,” Butler advised. “This gives buyers flexibility, as they can switch to a fixed-rate mortgage later at no cost, potentially benefiting from better timing.”
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By Proptechbuzz
By Ravi Kumar
