The Bank of Canada has once again reduced its key interest rate by a quarter of a percentage point, bringing it down to 4.25%. This is the third consecutive cut, with Governor Tiff Macklem suggesting that further rate cuts are possible, though he provided no guarantees. While this is generally seen as good news for variable-rate mortgage holders, potential homebuyers remain cautious.

Waiting for More Substantial Cuts

Despite the recent reductions, mortgage rates remain relatively high. Some analysts argue that a full percentage point reduction is needed to significantly boost buyer activity. For now, many buyers are choosing to stay on the sidelines, waiting for further cuts before re-entering the market.

However, interest among buyers is still present. According to market observer Robert McLister, searches for the term "mortgages" on Google have reached their highest point since the pandemic, indicating continued buyer curiosity.

Affordability and Market Dynamics

Affordability remains a major concern for many Canadians. Governor Macklem has noted that, despite the recent price declines, housing prices may actually rise in the future. The current dip in home prices combined with lower interest rates could reignite demand, potentially reversing the current price trajectory.

In its latest quarterly forecast, released in July, the Canadian Real Estate Association (CREA) predicted that the average national home price would reach $694,393 this year and rise to $729,319 next year.

Looking Ahead

As the Bank of Canada continues to adjust its monetary policy, homebuyers and investors are watching closely. The coming months will likely determine whether the market regains momentum or if caution continues to dominate buyer behavior.