Most Canadians Are Waiting For Rates To Drop To Buy A Home:  BMO Survey

Canadian real estate sales are generally down from historic levels, but households are just waiting for cheap credit. That was just one key insight from BMO’s latest Real Financial Progress Index (RFPI). The survey-based index seeks to capture household economic health, and their perspective on the economy. Not surprising, a good share of the takeaways this year are regarding housing. 

Canadians Are Waiting For Falling Rates To Buy A Home

Most Canadians are on the sidelines waiting for lower interest rates before they buy a home. The survey found 2 in 3 (68%) respondents are holding out for cheaper mortgage rates. Over a quarter (26%) cited rising rates as the reasons they held off on moving. Just under 1 in 5 (18%), felt macroeconomic uncertainty has them hitting pause. 

Prospective homebuyers waiting for falling rates is an interesting insight. Borrowing rates only tend to decline in economic downturns, traditionally the hardest time to buy a home. The moral hazard generated from the excessive stimulus during the last round of cuts, has everyone convinced otherwise. 

Markets where the average person expects state assisted credit stimulus in a downturn is a problem that likely exceeds what most policymakers understand. On the upside, it’ll be interesting to watch. 

Most Canadian Millennials Haven’t Seen Financial Security Improve

Canadians are also experiencing anxiety related to their high cost of housing. High shelter costs were cited as the third most common anxiety trigger (71% of the survey). BMO notes it was only behind unknown expenses (83%), and financial uncertainty (81%). In other words, virtually everyone in Canada is worried about their economic stability to some degree. 

Young adults are split on how to feel about this economic uncertainty, with older households seeing clouds forming. Most (57%) of Gen Z (18 to 24 years old) felt more financially secure than last year. Only a minority (43%) of younger Millennials (25 to 34 years old) felt the same way, with most not seeing an improvement. The former is transitioning from college to a career at that age, while the latter is looking to buy their first home. It’s probably a solid guess this is another housing related issue. 

High Housing Costs Are The Biggest Drag On Prosperity

Just over a third (37%) of Canadians feel high housing costs are holding back their progress. It was the largest self-perceived drag on financial prosperity, followed by monthly bills (34%), and future uncertainty (33%). For context, the share of households that rent their home is roughly the same size as the share that feel high housing costs are holding them back. 

High housing costs are holding households back, but they see cheaper mortgage debt (which stimulates demand) as the trigger to buy a home. Most households are closely watching credit markets for their shelter purchase, but virtually none of them understand how they work. This is going to be quite the show.

25 Comments

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  • Kate 8 months ago

    I am millennial and I am not waiting rates to drop to buy a home. I am waiting when the rise will finally pope the bubble to buy my first house.

    • Old Greg 8 months ago

      Bingo, let rates rip higher. Crush the price and pick em up!

    • Fraser 8 months ago

      bingo

    • george 8 months ago

      Dream on. Do you think the 38% of the current MP’s who are entirely vested in RE business want see their assets disappear? Hahahaha….how naive

      • Klein 8 months ago

        Canadian government created slavery of modern age.
        Average citizen can not afford food because of huge inflation and enormous cost of shelter.

      • Chris 8 months ago

        You calling other people naive? Do you know anything about economic history at all? How silly of you to think that these politicians have a choice. Inflation is persistent. They now have no choice but to tackle it. The last time Germany let inflation go rogue, we got a Hitler. There will be so much social unrest if inflation doesn’t decline. They have no options now but to pick their poison. Real estate prices are going down. Recession is coming.

      • CynicallyRealistic 8 months ago

        Even the government can’t hold back the waters when the dam bursts. They’re plugging holes with their fingers but eventually, hopefully soon, they’ll run out of fingers.

    • John Jingle 8 months ago

      With the number of people moving into the country and lack of supply for housing. Regardless of interest rate, it won’t change the demand for housing unfortunately. People may wait for the interest rates to fall, but the demand for housing as the number of people moving into this country increases will not fall.
      Hard to imagine a situation where a significant increase in supply will come out of nowhere.

    • Chris 8 months ago

      Good for you Kate. Be patient, ignore the naysayers and the know-it-alls.

      Market usually bottoms a while after the central banks pivot. Real estate usually takes a bit longer than the stock market. Stay safe.

  • J_Morrow 8 months ago

    Unless they’re just waiting for a 25 bps drop, good luck with that!

    Inflation and high interest is our semi-permanent future, albeit with dips here and there. If you, like me, do not presently own a home I advise the following: i) let that dream go ii) make plans to live in a small community or another country, or iii) make as much currency as you can asap and store it in precious metals or other value storages until you can pull the trigger – real prices will come down.

    Mortgagemageddon 2025! (but you’ll still need to by a cash buyer to play)

  • Tom Collier 8 months ago

    Have you ever thought for just a moment that the ongoing housing crisis is by design? Do you think Klaus Schwab and the World Economic Forum is just a conspiracy theory?

    I grew up in the early 1960’s during a massive housing boom. Really good houses, with real plaster walls, hardwood floors and fireplaces, etc. The elite and establishment were afraid of socialism and that returning soldiers might upset the status quo.

    They found a way to build millions of houses quickly. When I was a kid, I use to wander around hundreds of houses being built, after school, in Richmond BC. I use to pick up bent nails and scrap copper for some extra pocket money. Some tradesmen would be still at work, they were kind, they let me help, I ran wire for electricians, a plumber showed me how to solder, and carpenters taught me what a kick back was with a skilsaw.

  • Peter 8 months ago

    Greater Fools

  • Mark from etobicoke 8 months ago

    If u want house in GTA then massive mortgage for hi co-earning couple. Other options can be. Cheaper towns and or buying nice vacant lot and building house or cottags

  • Austin V 8 months ago

    I’m interested in seeing how the BOC decision tomorrow turns out. I would like to see higher interest rates, as this would bring home prices down further. I believe it would be better for the average citizen in the long run. It should disincentivize investors from our markets, and make it so that the value of a down payment is stronger in relation to the total value of each home. Then, once interest rates drop (Who knows when that will be), households can enjoy a bit more breathing room to invest elsewhere in our economy.

  • brett clark 8 months ago

    There is too much greed out there. At 62 I was fortunate enough to get a home at a reasonable price. My millennial kids not so lucky. It seems that
    Canada is addicted to housing growth propping up the g.d.p. It also seems to be real estate investment trusts are a big part of this problem. It is time that the government do something to help the younger people, maybe by
    some of the money from the property purchase tax ect.Low income housing must also be a be a priority.

  • JCH 8 months ago

    Sadly, I’m now cheering on inflation – the higher it it is and the longer it drags out, the harder it’ll be for the idiots who run this country to return interest rates to near zero, their preferred permanent destination.

    Let’s start pricing risk more appropriately and see if the overleveraged can hit 100 year amorts before the banks finally start foreclosing and allowing real price discovery.

    • Woolsock 8 months ago

      Sadly, I’m also quietly cheering on interest hikes. Lotta folks gonna get hurt, but a lot of folks are being hurt now and in the near future with housing costs so skewed. Interest hikes seem the only thing that has any chance of breaking the pervasive psychological obsession with real estate in Canada and restoring some form of normalcy to this segment of the economy.

      • Mapko 8 months ago

        Yes, a lot of folks gonna hurt. Agreed. But for the many who invested more than a couple of years ago, they will still be looking at significant paper gains in home equity even if there’s a 30-50% drops in pricing, after many years of unrealistic and historically unprecedented price growth rate.

    • Average Man 8 months ago

      This. Let the bodies hit floor

  • Simon Dai 8 months ago

    I still remember when all big 5 Canadian banks had a prominent link on their web page “is it better to rent or to own?” LOL

  • Chicken Little 8 months ago

    Well said. We are still experiencing negative real interest rates, tax free capital gains (on principal res.), and a defacto “Put” on real estate from all G7 governments (in concert, as usual). This is after printing an extra 20% of our money supply and recklessly spraying it into the economy for the last 3 years. Since this gov’t has killed most of our other industries, so where else but RE to put your money?

  • Mark Bayly 8 months ago

    The country is being run on borrowed money Massive immigration is causing all kinds of issues with suppressing labour rates and lack of housing. A very badly mismanaged country that will only get much worse Believe it or not the government is not your mommy and can’t pay your bills forever They are lying to get your vote.

  • Truth 8 months ago

    The last 15 years money has basically been free and money is not free. Low interest rates have created the unproductive escalation of real estate values in Canada putting the countries financial system at risk. The average home owners home value has increased in value each year just sleeping in their bed more then they make per year working at their jobs . Does this make any sense ? Are these real gains unless you sell? People borrow against equity and spend what they dont have and they are getting hit with rates going up and the asset values will come down and thats what has to happen to have a productive country and a future and purpose for young people. The era of free money is over and the decline of asset values is on the horizon if your over leveraged get out now and minimize your losses or take your gains and actually realize them before they dissipate. Remember you havent made any real money in real estate or stocks until you sell. The governments are out of magic bullets and can no longer keep manipulating the financial system to stop the pain the pain must be realized.

  • Mary 8 months ago

    I think there’s a bit more to this story. Investors and speculators are waiting for rates to drop, since they’re banking on RE appreciation. First time homebuyers are waiting for prices to drop.

    • Austin V 8 months ago

      I agree, though it’s tough and kind of an unlikely gamble. Regular people don’t have enough access to real estate data to make a truly informed purchase imo.

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