Majority of Canadians Skeptical About Rate Cut Effect on Affordability, House Sales: Survey

A person walks by a row of houses in Toronto on July 12, 2022. Cole Burston/The Canadian Press

Canadians are skeptical that the recent Bank of Canada interest rate cut will have any effect on affordability or sales in the housing market, according to a new survey.

Following last month’s cut from 5 to 4.75 percent—the first in four years—around three in four Canadians surveyed said they are doubtful the cut will lessen the load financially, according to the July survey by research firm Abacus Data.

Seventy-two percent of the 1,550 Canadians surveyed said the cut will have little or no effect on the housing market overall, while 73 percent said the cut will not have a significant impact on the affordability of major purchases such as housing.

“The initial rate cut by the Bank of Canada seems to have had a minimal effect on perceptions of the housing market in general,” Abacus Data vice-president of insights Eddie Sheppard wrote in the report.

Only 35 percent of Canadians said lower rates would increase housing market activity. Meanwhile, 42 percent expect no significant change, and 4 percent say the rate cut would decrease activity. The remaining 19 percent of respondents were unsure about the effects of the cut.

Younger adults showed a more optimistic outlook than their older counterparts, with almost half of those aged 18 to 29 expecting a slight or significant increase in housing market activity. Adults aged 60 and older were most skeptical with 88 percent saying the cuts would have little or no impact on the housing market.  

Inflation fell to 2.7 percent in June, according to newly released Statistics Canada figures, leading to speculation that a second Bank of Canada interest rate cut could be around the corner.

Perceptions on Buying and Selling Homes

The majority of Canadians, 80 percent, said interest rate cuts wouldn’t make homeownership more affordable.

Doubt was greatest among those aged 60 and older, with 93 percent of them anticipating no improvement in housing affordability. This sentiment is shared by most adults aged 45 to 59, with more than 80 percent of them predicting the same outcome.

More than 60 percent of respondents predicted there would be no changes in the number of homes sold in the next six months, and nearly 70 percent said the rate cut did not change their timeline to purchase a new home. Only 10 percent said the bank’s announcement made them likely to buy a home sooner, and just under 20 percent said they want to wait for more cuts.

Among Canadians with plans to sell their homes, 76 percent said their home sale plans remained unchanged, and only 11 percent said the recent rate cut made them more apt to sell their homes earlier. The rest of the participants, 12 percent, said they would be more likely to delay their sale.

“Many are playing it safe. They’re not convinced [the rate cut will] make buying a home cheaper or shake things up much in the housing market. About half think it won’t really change how homes are sold either,” Mr. Sheppard noted.

“The decision-making process for buying or selling homes reflects a wait-and-see approach, with a notable portion intending to delay decisions until further rate cuts are realized.”

The Bank of Canada will review the updated inflation figures, and will make its next interest rate decision on July 24.