Hand holding home buying house

Real estate market analysts say the Bank of Canada’s much anticipated decision to lower its key interest rate could be the sign that many would-be homebuyers have been waiting for to make their move.

The central bank announced the quarter-percentage-point cut on Wednesday, its first in more than four years, meaning its key interest rate now stands at 4.75%.

It comes after some of Canada’s largest cities have seen ballooning home listings in recent months from droves of sellers listing their properties, despite demand from potential buyers not keeping up.

That includes the Greater Toronto Area, where new listings last month jumped 21.1% year-over-year, with 18,612 properties put on the market. Calgary and Vancouver have seen similar trends, with new listings rising 18.7% and 12.6%, respectively, year-over-year in May.

But home sales declined in all three cities. In Toronto, there were 21.7% fewer sales in May year-over-year, the Toronto Regional Real Estate Board reported Wednesday.

The board said 7,013 homes changed hands in the month compared with 8,960 in May of last year, which coincided with a brief market resurgence. TRREB president Jennifer Pearce said homebuyers were waiting for “clear signs” of declining mortgage rates before going ahead with purchasing a property.

“As borrowing costs decrease over the next 18 months, more buyers are expected to enter the market, including many first-time buyers,” she said in a press release.

“This will open up much needed space in a relatively tight rental market.”

Around 56% of Canadian adults who have been active in the housing market said they have been forced to postpone their property search since the Bank of Canada began raising its key lending rate from near zero in March 2022, according to a Leger survey earlier this year commissioned by Royal LePage.

Among those waiting on the sidelines, just over half said they would resume their search if interest rates went down, including one-in-10 who indicated a 25-basis-point drop would be enough for them to jump back in.

“There certainly is pent-up demand,” said Karen Yolevski, chief operating officer of Royal LePage Real Estate Services, in an interview.

“Typically when rates go down, prices go up. So this would be the time where people come off the sidelines, knowing and anticipating that prices are likely to rise.”

In the Greater Toronto Area, the average selling price of a home was down 2.5% year-over-year to $1,165,691 last month. There were 2,701 sales in the City of Toronto, a 17.3% decrease from May 2023, while throughout the rest of the GTA, home sales fell 24.3% to 4,312.

“In general, buyers have been looking for some positive signs,” said Scott Ingram, a sales representative with Century 21 Regal Realty in Toronto.

“The sentiment effect of this always punches above the actual dollar and cents. When people are looking for any bit of good news, they’ll take it.”

Yolevski cautioned the market rebound “won’t be an overnight effect” as Canada is likely to see a more gradual return to higher sales levels. The Leger survey found more than two-in-five prospective homebuyers were waiting for a cut of at least 50 or 100 basis points before resuming their search.

“People purchase homes less so on the sticker price, the actual sale price of the property, but more so on the monthly carrying cost of the property,” said Yolevski.

“So interest rates going down will, over time, lower monthly carrying costs and that will ease some of the burden that homebuyers feel, particularly first-time buyers, if they’re feeling stretched.”

TD Bank senior economist James Orlando predicted the path for rate cuts going forward for the central bank would be slow, despite it acknowledging the economy doesn’t need such high interest rates any longer.

“It will proceed cautiously. It must ensure that inflationary pressures don’t rebound like they have in the U.S. in recent months,” he said in a note.

“It also doesn’t want to reignite the housing market, where prospective buyers have been waiting for greater interest rate certainty. We expect the (bank) is on a cut-pause-cut path, with the next cut likely occurring in September.”

The June decision is welcome news for homeowners with variable-rate mortgages, said Victor Tran, a mortgage and real estate specialist for Ratesdotca.

The company estimated that for every 25-basis-point decrease, floating variable-rate mortgage holders can expect to pay $15 less per $100,000 of mortgage.

“Those up for renewal in the coming months are facing monthly payment increases of up to 60%, according to the Bank of Canada’s annual Financial Stability Report, and a 25-basis-point rate drop is a step towards easing those increases,” he said in a press release.

“We will likely see an uptick in mortgage-holders considering variable rates on renewal to take advantage of the downswing, though the spread between fixed and variable is still significant and the Bank of Canada may spread decreases out over a number of months.”


Greater Vancouver’s real estate board says the number of homes that changed hands in May fell 19.9% from the previous year as more new properties continued to hit the market.

Greater Vancouver Realtors said Tuesday there were 2,733 home sales in the region last month, down from 3,411 sales recorded in May 2023 and 19.6% below the 10-year seasonal average for May.

That came as the number of Metro Vancouver homes listed for sale rose 46.3% year-over-year to 13,600, which is nearly one-fifth higher than the 10-year seasonal average. In May, there were 6,374 detached, attached and apartment properties newly available — a 12.6% increase compared with May 2023.

Andrew Lis, the board’s director of economics and data analytics, called it a “surprise” that May sales came in softer than usual.

“It’s a natural inclination to chalk these trends up to one factor or another, but what we’re seeing is a culmination of factors influencing buyer and seller decisions in the market right now,” he said in a press release.

“It’s everything from higher borrowing costs, to worries about the economy, to policy interventions imposed by various levels of government.”

The latest data comes a day before the Bank of Canada is set to announce its latest policy interest rate decision. With some economists forecasting a rate cut, it could spur more potential homebuyers currently waiting on the sidelines to enter the market.

The composite benchmark home price was $1,212,000, up 2.3% from a year ago and a 0.5% increase from April, the real estate board reported.

“With market trends now tilting back toward more balanced conditions, as the number of new listings outpaces the number of sales, we should expect to see slower price growth over the coming months,” Lis said.

“Up until recently, prices were climbing modestly across all market segments. But with rising inventory levels and softening demand, buyers who’ve been waiting for an opportunity might have more luck this summer, even if borrowing costs remain elevated.”