Aspiring Canadian Homeowners Wait for Rate Cuts

Canadians dreaming of homeownership are facing a double whammy: rising interest rates and a stubbornly high cost of living. A survey by the Bank of Montreal (BMO) found that 72% of aspiring homeowners are postponing their purchase until the Bank of Canada cuts rates, a 4% increase from 2023. This wait-and-see approach is dampening expectations for a spring rebound in the housing market.

While some hope for a rate cut in the second half of 2024, BMO Capital Markets senior economist Robert Kavcic warns that affordability is unlikely to arrive soon. The Bank of Canada left its benchmark rate unchanged in April but signalled a possible cut in June or July. However, global factors like inflation in the United States could delay this decision.

The survey reflects a growing sense of financial strain among Canadians. Over half (58%) are concerned about the cost of living, while inflation (56%) and their overall financial situation (38%) are also major sources of anxiety. This cautious sentiment is reflected in the near-term purchase plans of aspiring homeowners. Only 13% plan to buy in 2024, with a significant portion (26%) deferring their purchase until 2025 or later.

The report also highlights a generational divide in attitudes towards homeownership. Millennials and Gen Z remain the most likely (68% and 70%, respectively) to view homeownership as a major life goal. However, a significant portion (over 50%) of these aspiring homeowners believe this dream is out of reach, with many (33% for Gen Z and 37% for Millennials) expecting to wait until 2025 or later. This financial pressure is leading some young Canadians (52% for Gen Z and 31% for Millennials) to turn to "The Bank of Mom and Dad" for help, with over half of Millennial parents (54%) planning to offer financial assistance to their children, including down payment contributions.

The BMO survey paints a picture of a Canadian housing market in limbo. Aspiring homeowners are caught between their desire for property and the harsh realities of affordability. While a potential rate cut in the coming months could bring some buyers back into the market, the road to normalcy for Canadian housing prices appears to be a long one.