Bank of Canada’s First Rate Cut in Four Years Insufficient for Most Homebuyers, Poll Shows

The Bank of Canada’s recent interest rate cut, the first in over four years, offers little relief to prospective homebuyers burdened by high borrowing costs, according to a new Ipsos poll conducted for Global News.

The Ipsos poll, conducted after the Bank of Canada’s 25-basis-point rate cut on June 5, reveals persistent pessimism about housing affordability. Sean Simpson, senior vice-president at Ipsos Global Affairs, notes, “What Canadians are saying to us here is, 25 basis points is just a drop in the ocean.”

The central bank’s policy rate directly influences housing costs, affecting both mortgage qualification and monthly payments. Despite the rate cut, 63% of respondents said they would remain on the sidelines of the housing market due to high interest rates.

The survey, which interviewed over 1,000 Canadians aged 18 and older between June 7-10, highlighted the challenges faced by non-homeowners:

• 6% said a less than one percentage point drop in interest rates would prompt them to consider buying a home.
• 25% needed cuts between one and 3.99 percentage points to enter the market.
• 10% required even steeper drops to make home ownership feasible.

Simpson points out that while the quarter-percentage point reduction is a “good start,” Canadians feel there’s a significant distance to cover before housing affordability sees substantial improvement. “The reaction from Canadians is, ‘Nice try. Keep going, Bank of Canada,’” he says.

Despite the rate cut, 45% of respondents believe they won’t be able to afford a home, regardless of how much interest rates fall. Additionally, 78% think home ownership in Canada is now reserved for the wealthy, a slight decrease from 80% in April.

Interestingly, the number of Canadians who have given up on ever owning a home dropped to 62%, down from 72% in April. This unexpected decline suggests a shift in sentiment, with some Canadians adopting a “sense of optimism” due to the anticipated rate cut cycle.

The Bank of Canada’s initial rate cut and potential for further reductions have created a sense of “certainty” among prospective homebuyers, who were previously unsure if borrowing costs would continue to rise. Simpson argues that this initial cut could be instilling confidence in Canadians to start planning their home-buying moves, even if it hasn’t yet motivated them to enter the market.

While the Bank of Canada’s first rate cut in over four years marks a significant move, it falls short of alleviating the financial pressures faced by many Canadians aspiring to buy homes. The survey results underscore the need for more substantial reductions in borrowing costs to make home ownership accessible to a broader population.