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Real estate industry abandons playing the waiting game after Bank of Canada holdup – Yahoo Canada Finance PiPa News

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Real estate industry abandons playing the waiting game after Bank of Canada holdup – Yahoo Canada Finance


The Bank of Canada’s decision to keep its key overnight interest rate steady at five per cent for the fourth time was widely expected in the real estate sector, but whether it will be enough to bring buyers back into the market remains to be seen. debate.

“(The) decision to hold rates is indeed a welcome for many Canadian homebuyers,” ReMax Canada president Christopher Alexander said in response to the central bank’s January 24 announcement.

Alexander, pointing to the market rush in the early days of the pandemic, said he hoped the containment would be enough to spur more activity, “especially among those taking a ‘wait and see’ approach.” and waiting. for the right time to re-enter the market.”

Mortgage strategist Robert McLister, however, points to a different new historical pattern.

“Last January we saw the average house price in CREA rocket 19 percent in just five months after the first bank rate freeze. That’s an incredible move,” McLister said. “Will we see the same this spring? It’s not what’s expected but if mortgage rates slide into the mid-to-low-four-percent range, I sure wouldn’t bet against it.

James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender, says when the central bank reveals details about a cut that can start the housing market.

“Any sign of a rate cut from the Bank of Canada could put immediate pressure on home prices,” he said.

Without them, there could be a shift in the opposite direction, as lenders hold back on raising mortgage rates after the recent rise in bond yields.

“Lenders will consider moving fixed rates higher because there is no new information from the bank,” Laird said.

One factor working against a long-term surge in home prices may be the Bank of Canada itself: Central bank governor Tiff Macklem said a jump in home prices could prompt the bank to change in its interest rate hikes.

According to the Canadian Real Estate Association (CREA), home prices are forecast to rise in 2024 and 2025, after the MLS Home Price Index (HPI) ended 2023 at 0.7 percent in December. The average price also rose 5.1 percent last December to $657,145.

If there is a rebound in the real estate market, McLister said rate relief will likely be slower.

“If housing activity is greater than expected, mortgage rates could remain at a higher altitude, for longer. That doesn’t mean the prime rate will stay at 7.20 percent, but it does mean the relief rate will be less. going forward,” he said. “The pace of cuts will be slower and the trough in rates will be higher.”

According to McLister, if housing demand continues to contribute to inflation, the Bank of Canada will face a difficult decision. It may have to choose between allowing higher house prices or risking negative effects on the wider economy by keeping interest rates high.

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