Many people are anticipating a delay in the recovery of the Canadian housing market. A recent survey by the Bank of Montreal shows that 72% of potential homebuyers are holding off on purchasing until the Bank of Canada rate cuts are introduced. According to BMO, the number of people waiting for the Bank of Canada rate cuts has increased by 4% from 2023.
Among the nearly 40% of those planning to buy a home soon in the Canadian housing market, only 13% intend to purchase in 2024, while 26% plan to buy in 2025 or beyond.
Canadians anticipate hoping for Bank of Canada rate cuts later this year. According to Robert Kavcic, senior economist at BMO Capital Markets, this could push more buyers into the market and stabilize sales. However, more Canada rate cuts should happen before affordability returns to recent levels.
The Bank of Canada maintained its benchmark interest rate at five percent this month but showed a possibility of Canada rate cuts in June or July. Yet, many factors could affect the decision of Bank of Canada rate cuts domestically and internationally. While inflation in Canada has moderated recently, the central bank will closely monitor the consumer price index data scheduled for release on May 21, just before its June 5 meeting.
High inflation in the United States remains a worry. Expectations for a Federal Reserve rate cut have been delayed until December or beyond. If there is a gap between policy rates, it could stress the Canadian dollar, maybe resulting in inflation again.
When are the Next Canada Rate Cuts
Bank of Canada Governor Tiff Macklem indicated that high interest rates are having a strong impact in Canada compared to the United States. This might suggest that the monetary policies of the two countries may start to differ in the upcoming months.
Speaking to the Senate Committee on Banking, commerce, and the Economy, Macklem said Canadian inflation is moving towards the 2% goal.
On the other hand, US Federal Reserve Chair Jerome Powell, in a press conference earlier, had a different viewpoint. He said that a series of high inflation readings in the US had made him less certain about the need for the Fed to introduce interest rate cuts this year.
Tiff Macklem told the Senate committee that the economic data in Canada and the United States show some differences. While the US had better inflation readings six months ago than Canada, Canada has recently seen more positive inflation data.
He said that Canada’s economy has been weaker overall than the US, and monetary policy seems more effective in Canada. One reason for this difference could be the different conditions in the mortgage markets between the two countries.
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