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Rising Mortgage Rates Dampening Homebuyer Confidence in the Market: Survey

Mackenzie Scibetta by Mackenzie Scibetta
October 23, 2023
in Canada, Mortgage News, Mortgages
Reading Time: 5 mins read
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Homebuyers have been feeling a lot of uncertainty about whether the Bank of Canada will further hike interest rates this week, but recently released data from Statistics Canada shows inflation cooled in September and may mean relief for borrowers. 

Inflation fell from 4% in August to 3.8% in September, suggesting the impacts of previous rate hikes are now being realized.  At 5%, the current overnight lending rate is already at the highest it’s been in years, and with that, the 5-year fixed mortgage rate is also at a 15-year high of 5.49%. The impact on the real estate market as a whole has been clear as national sales tapered off for the third month in a row in September and new listings rose by 12.6% month-over-month according to the Canadian Real Estate Association. 

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After months of high borrowing cost conditions, what is the sentiment among homeowners and homebuyers? In a recent survey of more than 1,600 Zoocasa readers, the overwhelming majority of respondents said that if mortgage rates continue to increase, it would negatively affect their interest in real estate. 

The last time we conducted this survey was in the spring when the overnight lending rate was 4.75%, and at that time 71.3% responded that further rate increases would negatively affect their interest in real estate. In this most recent survey, that number has jumped up to 79.1% of respondents, suggesting both affordability and real estate market sentiment have deteriorated over the past few months. Of respondents who said they were first-time homebuyers, the effect of uncertain economic conditions is even more apparent with 86.3% of first-time homebuyers saying further increases to mortgage rates would negatively affect their interest in real estate. 

Housing Market Concerns Spur Need for Increased Government Involvement Says Homebuyers

Most recently, the Bank of Canada decided to hold the overnight lending rate in September following three previous rate hikes this year. However, the reaction from buyers was largely lukewarm. The majority of respondents were neutral when asked whether the Bank of Canada’s announcement to pause interest rate hikes has had a positive impact on their interest in the real estate market. 

  • Read: Homes are Selling Below Listing Price Across the GTA – Here’s By How Much

This was followed by 23.3% of respondents agreeing that the pause has had a positive impact on their interest in the real estate market while  16.1% strongly disagreed that the pause had a positive impact. This suggests it’s going to take more than just a pause from the Bank of Canada to get homebuyers off the sidelines.

It’s not just high interest rates that have impacted the outlook of homebuyers; housing supply is low across the nation which is keeping home prices propped up. Federal and provincial governments have made it their priority to solve the issue, but have they done enough? 

  • Read: Here are the Diverse Approaches Canadian Cities are Taking to Tackle Housing Affordability

At 38.9%, the majority of survey respondents said they strongly disagree with the statement that the government of Canada is doing enough to address the housing shortage. Just 5.4% of respondents strongly agreed, 15.6% disagreed, 14.3% agreed, and 25.9% were neutral. As the government aims to welcome 485,000 newcomers in 2024 and 500,000 in 2025, the demand for housing will grow and unless more effort is put into boosting supply, inventory struggles will continue. 

Survey respondents shared similar sentiments about the government’s efforts to address housing affordability with the majority of respondents saying they strongly disagree that the government has done enough to address the issue.  

Despite the national benchmark price trending downward for the past three months, home prices in every major market in Canada have increased dramatically over the past five years. This is especially true for the most sought-after markets like the Greater Toronto Area and Greater Vancouver, which experienced price increases of $386,200 and $209,800 respectively. This is likely one factor that resulted in the majority of respondents saying they do not feel now is a good time to buy. 

At the same time, more than half of survey respondents said they are looking to buy a home in the near future. 5.4% said they plan to make their home purchase in 1-3 months and 7.1% said they plan to make their purchase in 4-6 months, showing motivated buyers are still out there. 

Need help navigating the ever-changing Canadian real estate markets? We’re here for you! Give us a call today to speak to an expert agent in your city. 

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Mackenzie Scibetta

Mackenzie Scibetta

Mackenzie Scibetta is a seasoned Content Marketing Specialist at Zoocasa, where she brings her expertise to the world of real estate. As a dedicated real estate writer, Mackenzie's primary goal is to equip home buyers and sellers with the most up-to-date market insights, enabling them to navigate their real estate ventures with confidence. Mackenzie's writing is characterized by its depth and breadth, covering a wide range of topics related to the real estate industry. From exploring the intricacies of mortgages to meticulously tracking and analyzing trends in local markets across Canada and the U.S., Mackenzie is known for her comprehensive and data-driven reports. Her commitment to providing valuable information is evident in the consistent quality of her work. Mackenzie's research and insights have earned her recognition from prominent media outlets. Her expertise has been featured in BNN Bloomberg, CTV News, the National Post, The Globe and Mail, and even The New York Times. These accolades underscore her position as a trusted authority in the field of real estate.

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