Will an interest rate cut be enough to prompt buyers off the sidelines and into the market?
One trend we’ve seen on REW and market analysts have noticed is that while buyers are looking at properties and saving them to wishlists, that doesn’t always translate to buying. High prices, low economic prospects and uncertainty brought about by tariffs, trade wars and other issues have kept moods low. A rate cut arriving at this time may be good news, but it’s not the whole story.
“Honestly, I think a rate cut helps,” says Swezey. “It's good for confidence, but I don't think it's necessarily the switch that's going to turn the market around overnight. What it does do is it gets people talking again.” Perhaps the conversations this recent BoC announcement prompts could nudge some buyers into action.
But rates, as mentioned, aren’t everything. Swezey elaborates that, “a lot of borrowers or buyers that I talk to, they're not just watching rates, right? They're watching their paychecks.” The cost of living in general has risen lately, so even if a rate cut means a mortgage becomes slightly more affordable, other expenses may outweigh it.
“I mean, obviously everything from groceries to insurance to even childcare is costing more. So a small rate drop doesn't necessarily fix that monthly pressure,” continues Swezey. “There's also a lot of concern around job security right now, especially in the tech and construction fields. So people do want to buy, but they want to feel safe doing so.”
Does this rate cut mean anything for pre-sales and newly-built homes?
The pre-sale and newly-built condo markets have been especially hard-hit by recent downturns in the real estate market. With thousands of unsold units sitting empty and hesitant buyers, this market segment may find news of a rate cut especially welcome. Yet even here it may not be everything it seems.
“I think it helps sentiment, and developers obviously love a good headline, like the Bank of Canada cutting rates,” says Swezey. “But unfortunately, I think the pre-sale market needs a little more than that.”
Swezey notes that a confluence of factors, including construction costs, taxes, fees and other charges, plus immigration demand and other structural aspects are playing a major role in the pre-sale and newly-built homes market. These issues aren’t addressed by a rate cut.
“I think overall, we need at least another half a percent for things to really get going, right?” says Swezey.
What can we determine from previous rate cuts?
In the past, the BoC has cut rates and this in turn has stimulated real estate activity. This time feels different, however. Why? According to Swezey, “in this situation, I think it's really about context. So in earlier years, a rate cut meant people suddenly qualified for way more, whereas today prices are still so high…” She goes on to say that, “Prices are so high, everyday costs are even higher than they have ever been. So a lower rate doesn't necessarily stretch the budget as much as it used to, plus there's still a sense of ‘wait and see’.”
Buyers don’t just make moves when the market is ideal. In fact, as Swezey says, “Obviously, if you can time the market, that's ideal. But I think you really have to purchase a home when it is financially the right time for you.” And for many people, it may not feel that way yet.
Swezey thinks that many people are likely trying to plan out their futures instead. She believes they may be waiting to see how the economy overall shakes out and what the impacts will be on their monthly budgets before feeling confident enough to start purchasing homes.
Is this the last rate cut we’ll get this year?
In 2025, there’s one BoC rate announcement remaining, scheduled for December 10th. Will we see another cut then? No one can predict the future, but we can offer some grounded observations.
“It really depends on how the data looks through the end of the year,” Swezey says. “My gut says that we're probably going to see one more rate cut. I just don't know if it's necessarily going to be before this year is over."
Swezey notes that the Bank of Canada has other priorities in addition to rates. Inflation remains a concern, and the economy overall may suffer if rates get cut too far too quickly. We’ll have to wait for the Bank of Canada’s next announcement to be sure.
What does this mean for potential buyers?
If this announcement has prompted you into considering purchasing a home, or you are less sure about buying but still wondering what it all means for your situation, Swezey has some advice: “[get] the proper information – you know, making sure that you're speaking to a professional that can guide you and give you transparent advice.”
If you’re feeling anxious about all this news, especially after reading lots of headlines and articles, Swezey notes that, “it's just really important to make sure that you're gathering the proper information that's specific to you.”
Rather than trying to navigate this terrain alone, “when you have a trusted team of professionals that have your back… they're going to lead you to what's the best,” says Swezey. “Instead of trying to figure it out on your own, leave it to the professionals to help guide you.”
