Homebuyers, wrestling with the same tariff-fuelled uncertainty as the Bank of Canada (BoC), are unlikely to act even if the Bank cuts its overnight interest rate on Wednesday, industry experts say.
The housing market slowed to a crawl as the tariff threat began to take shape earlier this year, a pace likely to persist through the usually active spring season regardless of the BoC’s decision.
“I don’t think it will be the usual spring market, as much as I hope it would be,” Kingsley Ma, an area vice-president at RE/MAX Canada, told Yahoo Finance Canada. “All the buyers are on the sidelines because of the uncertainty, right? If you can’t pay the bills, it doesn’t matter what the interest rate is, because they’re all worried about their job security and things like that.”
“If there’s uncertainty about the ability to pay sizeable mortgages, then that throws everything up in the air,” said Kelly Ho, a certified financial planner at DLD Financial Group.
The limited activity happening in the market is largely by people earning significant salaries who can handle economic turbulence, says Ron Butler, a mortgage broker at Butler Mortgage. “We see very, very little of what you would call average people purchasing homes,” he said.
Just over 60 per cent of economists surveyed by Reuters expect the BoC to stand pat at 2.75 per cent. But that likely won’t matter — the BoC’s previous cut in March did little to move the market anyway, Ma says.
“Obviously, March was a slow month, and we likely will continue to see a slower market overall,” he said. “Because, I mean, even if you look at the stock market — it’s not good, even though it kind of bounced back a little bit” after U.S. President Donald Trump announced a 90-day pause on reciprocal tariffs.
The situation is slightly less grim for those looking to renew, Ho, the financial planner, says. “Those who were initially nervous about their upcoming renewals are no longer nervous because it seems like we’re in a rate environment where there’s some stability, or perhaps even rates going down,” she said.
In a speech in Calgary last month, BoC governor Tiff Macklem said the “pervasive uncertainty” meant the Bank would focus less on a specific economic outlook because “several outcomes can all look plausible.”
From a mortgage standpoint, Butler says two scenarios look plausible at this point — one in which rates are cut significantly lower as the economy sputters, and one in which rates rise in response to significant inflation.
If unemployment spikes and GDP crashes, Butler says, the BoC might cut rates down to, say, 1.75 per cent, and variable mortgage rates would follow a similar path. “It may not pull fixed [mortgage rates] down, because fixed has to exist in a world of government bond trading that is receiving some unique pressures,” he said, referring to the uncharacteristically turbulent bond market to which fixed rates are tied.
