Broker highlights continuing buyer caution
Many potential homebuyers are holding off on making purchases as they wait for more interest rate cuts from the Bank of Canada, according to mortgage broker Ron Butler.
Speaking with BNN Bloomberg in a recent interview, Butler explained that both the anticipation of further rate reductions and the hope for declining home prices are keeping buyers on the sidelines.
“Some potential homebuyers are thinking: ‘Well, there’ll be more cuts, I’ll wait and see,’ and you also have people sitting back and saying: ‘You know what, maybe the prices will come down too,’” the broker of Butler Mortgage said, describing the current market sentiment as a “classic deflationary sit-back-and-wait consumer pause to see what happens.”
The Bank of Canada recently lowered its overnight lending rate to 4.25%, marking its third consecutive rate cut. The central bank signalled that further reductions are possible if inflation continues its downward trajectory. This follows last year’s rate hikes, which saw the bank raise its rate to 5% in July.
Despite the recent easing, Butler said the uncertainty around the housing market remains a significant barrier to increased activity. Sellers, particularly those looking to upsize, are unsure of how much they will be able to sell their current home for in a fluctuating market.
“If you own a home and you want to go to a bigger home, you’re never quite sure what you’re going to get for your home,” Butler explained. “We went through 14 years where you knew almost to the penny what you were going to get because of generally a rising price environment, so that creates a challenge.”
Adding to the hesitation is job insecurity. Butler noted that many Canadians are facing uncertain employment situations, which dampens their interest in purchasing homes.
“People aren’t always interested in buying a new home when they’re worrying about their jobs,” he said.
Pressure in the condo market
Butler also addressed the condo market, which has been under significant pressure as prices fall and sales slow. He highlighted that speculative investors have largely exited the space due to market conditions.
“We don’t see any investors in the condo market; absolutely none,” Butler said. “Over the next two years, as much as 60,000 units (are) coming on stream… based on some delays and then some big activity about five or six years ago and boy, they are under price pressure, there’s no question.”
He added that the oversupply of condos presents a stark contrast to the nationwide calls for more housing supply. Butler found this dynamic “absolutely puzzling,” noting that the market may have focused too much on building small, investor-driven units that don’t meet broader housing needs.
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For those who are still entering the housing market, Butler offered advice on mortgage strategies. He suggested that variable-rate mortgages remain the best option during this uncertain period.
“Get variable, that’s probably the only sure thing that you know is coming down,” Butler told Bloomberg. “Then you have a lot of options; you can convert for free to a fixed rate next year and maybe your timing could be great.”
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