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Interest rate cut unlikely to provide immediate relief for housing market

Interest rate cuts by the Bank of Canada are not expected to bring immediate relief to the housing market. Despite some optimism about potential rate reductions later in 2024, the high borrowing costs and affordability issues are likely to keep many buyers on the sidelines.

Economists predict that the Bank of Canada may begin lowering interest rates by the middle of 2024, with more significant cuts potentially occurring later in the year. This gradual approach means any immediate impact on the housing market will be limited. The current rates, which have been held steady, are still high enough to deter many potential buyers from entering the market right away.

While there is pent-up demand for housing, especially in cities like Toronto and Vancouver, affordability remains a major challenge. High borrowing costs continue to strain budgets, making it difficult for many Canadians to purchase homes. Even with interest rate cuts, the cost of borrowing needs to drop significantly before a substantial number of buyers return to the market.

Some areas, such as Calgary, have shown resilience due to factors like interprovincial migration and tight inventory, but these are exceptions rather than the rule. For most of Canada, significant improvements in housing market activity are not expected until the second half of 2024, when more substantial interest rate cuts may spur buyer confidence and activity.

Overall, while the prospect of interest rate cuts provides some hope for future relief, the immediate outlook for the housing market remains challenging. Affordability and high borrowing costs will likely continue to weigh on potential buyers in the near term.



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