Recently, the Bank of Canada has once again cut interest rates. Announced July 24th, 2024, the Bank of Canada decreased the interest rate from 4.75% to 4.5%. This followed a June 5th 25 basis point reduction. The Bank will have two more opportunities in 2024, October 23rd and December 11th, to reduce rates further. They have eight scheduled rate reviews in 2025.According to the Financial Post, the newest rate cut may give some Canadians hope for the economy within the next few months. Specifically, the Financial Post reports that, using the Maru Public Opinion’s Household Outlook Index, more and more people are hopeful that the Canadian economy will improve over the next two months. Some cited factors contributing to this new found hope include slowing inflation rates and a stronger GDP.&nbsp;While many Canadians report to be feeling hopeful, how has this translated into home sales in recent history, given the decline in volume seen over the past little while? CBC says that despite this new sense of hope and optimism from Canadians, home sales across the GTA have actually fallen in the month of July. Of course, this is far too soon to say anything about the recently announced interest rate cut, but it offers some interesting practical perspective to how previous interest rate cuts have translated. CBC specifically says that while recent interest rate cuts have had yet to manifest in the actual housing sale numbers, they say “rising inventory and further rate cuts are expected to spark more market activity this fall.”So, despite the number of listings increasing from this time last year, the number of sales has decreased 16% from this time last year. CBC also says that homebuyers now have more negotiating power than ever before and homebuyers are benefitting from the power of choice. But, given how many Canadians have been not only unable to enter the housing market, but have also written off the prospects of owning a home in their lifetime, can beggars be choosers? How many of these new or first-time prospective homeowners even have the negotiating power CBC is talking about?The demographic in question who have written off the prospects of home ownership in their lifetime is largely younger millennials and Gen-Zs. To see how the people around me feel about this news, I asked my peers on social media whether the Bank of Canada’s interest rate decrease will impact their decision to buy a home. Most of the people this survey will reach are older Gen-z, born around the year 2001. There are people of all education levels, income levels, ethnicities, and more.60% of respondents answered “yes”, the interest rate decrease will be a factor in their homeownership decision. Even with a margin for error, a considerable number of people think that the interest rates would have an impact. I then asked people why they answered the way they did and got a few varying responses. Someone reported they said “no” because they don’t think small rate cuts will make enough of a change to sway their decision either way. Someone answered “yes” because they feel hopeful for some positive change that will actually make a difference - essentially answering the exact opposite as what the person who said no described.While some people have varying opinions regarding interest rate changes in Canada, the main consensus seems to be one of hope and optimism. That is great news. Consumer confidence is critically important when trying to break old sentiments or to establish a new trend.&nbsp;Unfortunately, the next step for these people is to do the math. While the trend is positive, there needs to be a sustained move in rates to make a difference for first-time buyers. For those with resources today, there may be bargains to be had very soon.

Interest Rates Cut: What Now?

Interest rates cut again. Could this be your chance to buy? Consumer optimism grows, but more measures needed for first-time buyers.

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