Bank of Canada interest rate cut could be 'tailwind' for GTA real estate

• By Mike Heddle
• Posted Monday, May 27, 2024 2:35 pm

Bank of Canada interest rate cut could be 'tailwind' for GTA real estate

The current rate is 5%

A lot of prospective homebuyers are waiting on the sidelines, hoping that the Bank of Canada starts cutting rates as soon as next month, according to a Toronto real estate official.

Jason Mercer, chief market analyst at the Toronto Regional Real Estate Board (TRREB), noted GTA housing sales were down 5% in April compared to the same time last year. And new listings were up by 47% during the same period.

“And so the market is sort of primed to see more buyers moving into the marketplace,” he said.

With inflation falling to 2.7% in April, the Bank of Canada’s next possible rate cut will come on June 5.

“There are a lot of buyers, or would-be home buyers, who are sitting on the sidelines right now, and they want to see that tangible evidence that the Bank of Canada is indeed going to start cutting borrowing costs. They need to see lower mortgage rates to meet their affordability threshold, if you will,” said Mercer.

He noted TRREB has been predicting an uptick in sales in the second half of 2024.

James Orlando, TD Economics’ senior economist, said it’s more likely that we’ll see the Bank of Canada announce a rate cut on July 24 than next month.

“(Lower inflation) raises the probability of a cut in June, but it’s still our view that the most likely path that the Bank of Canada, who hasn’t signalled a rate as of yet, would be to use that June meeting to tee up a rate cut in July,” said Orlando.

“Right now, for example, markets are prepared for July, as a time period when a rate cut could happen,” he added. “So, if the Bank of Canada came out and cut rates, and it’s not expected, that could cause financial marketing volatility, for example. So we still have...[READ MORE]