A move by the Bank of Canada to drop interest rates for the first time in more than four years is being welcomed in Calgary, but experts don’t expect it will have much of an effect on the city’s already hot housing market.
The BOC cut its overnight lending rate on Wednesday by 25 basis points to 4.75 per cent, down from the five per cent it had been sitting at since July 2023.
Curtis Prokopchuk, with eXp Realty in Calgary said while any relief is welcome, this could actually heat up the market even more than it already is.
“Prices will probably be inclining with the rate drop,” he told Global News.
Prokopchuk pointed out with home prices being as high as they have been for the past couple of years, waiting for an interest rate drop is not always in the best interest of prospective homebuyers.
He added he’s had several buyers who waited, only to see prices jump by $20-$30K.
“Lower interest rates may help the amount slightly,” Prokopchuk said. “But not enough to accommodate the rise in price.”
Sheldon Phillips, a mortgage broker with Enrich Mortgage Group agreed with Prokopchuk.
He said while the recent rate drop will benefit current homeowners with variable rates, the same can’t be said for those looking to get into the market.
“As far as the buyer’s market goes — it doesn’t help a ton,” he said.
Phillips said all lower rates do is give people more purchasing power and more purchasing power will put further pressure on sales and prices.
“When affordability changes for everybody — then everybody can afford more,” he pointed out.
“And with housing being at one-month of supply currently. then supply and demand kicks in and everybody pays more for the same thing. If they can afford to buy a house now — buy now. It doesn’t benefit them to wait because as rates go down, prices go up and they end up paying the same.”
Phillips added lower rates may actually help renters, as most landlords he knows are on variable rate mortgages.
“A lot of those mortgages, as those come down, there will be less pressure for rent to go up.”
The next rate announcement by the Bank of Canada will be on July 24.