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Home News Bank of Canada’s Rate Hold and its Impact on the Housing Market

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Bank of Canada’s Rate Hold and its Impact on the Housing Market

March 22, 2024

After a shaky 2023 housing market that was plagued with higher interest rates, economic recovery, housing shortages, and real estate prices that were still higher than market norms, 2024 is looking a little brighter for homebuyers and sellers.

In January, the Bank of Canada’s interest rate for housing markets held at 5 per cent. While it didn’t go down as many hoped, it didn’t go higher either, much to everyone’s relief. So, what does this hold in the rate mean for the country’s real estate industry?

After a year that saw many would-be buyers pushed out of the market because of the high interest rates, there is finally some hope on the horizon. While interest rates are still high, homebuyers are starting to feel more optimistic and are slowly re-entering the market.

While there have been mixed reviews by financial and real estate experts about the bank’s decision to hold the mortgage rate, the number of people re-entering the housing market is slowly increasing. There are several reasons why more people are house-hunting again, even with the interest rates sitting at 5 per cent.

Stable Economy

The high-interest rates continue to deter some would-be house hunters from looking for a home, but not everyone. Many cities have rebounded from the devastating economic effects of the pandemic. This economic stability is countering the high lending rate and giving buyers more confidence to make bigger purchases.

Despite consumer confidence, the Bank’s decision to hold their borrowing rate is slowing the housing market’s selling season so while there will be modest growth in the buying and selling of homes this year, there won’t be the huge price hikes and bidding wars that were seen in recent years.

This is good news for homebuyers and the economy. Housing prices are at more normal levels, so people aren’t at risk of overspending on a house.

The modest industry boom is also holding off a recession which is what the bank is intending with the held rates. A sudden spike in housing sales and prices could set the nation’s economy in a much worse recession than predicted.

Buy Now, Save Later

For many homebuyers who have been cautiously watching the market and interest rates, the bank’s decision to hold the lending rate is motivating some to buy now so they can save later. There is a lot of speculation about when the Bank of Canada will lower their rates and how that will eventually affect housing prices.

With interest rates on the Canadian housing market holding at 5 per cent, people are re-examining their budgets to determine what they can afford in housing purchases. The decision to buy now when the rates are sitting at the same percentage point is based on the prediction that when interest rates start to drop, housing prices will go up.

Enough Waiting

People are tired of waiting to make big purchases. With the rates holding at 5 per cent, homebuyers across the country are starting to relax a little more and feel like this is as good a time as any to buy a home.

Fixed Rates Expiring

Many current homeowners are watching the Bank of Canada’s actions very closely because their fixed mortgages are set to expire this year. The bank’s decision to hold the rate is offering some hope to existing homeowners as they plan for their mortgage renewal and guaranteed increase in their payments.
By not raising the rates, it is unlikely that most homeowners will be forced to sell their homes in the next year.

The consensus by financial and real estate experts is that the Bank of Canada’s interest rate and housing market will continue to move slowly in 2024 to avoid a major recession.

The interest rate’s hike in Canada’s impact on real estate will continue to push some would-be homebuyers out of the market. However, the bank’s decision to hold the rate at 5 per cent is giving some a hint of hope and optimism to buyers, sellers, and industry experts that the rates will slowly start to drop sometime this year and a recession can be avoide