Most Canadians Are Waiting For Rates To Drop To Buy A Home:  BMO Survey

Most Canadians Are Waiting For Rates To Drop To Buy A Home:  BMO Survey

Canadian real estate sales are generally down from historic levels, but households are just waiting for cheap credit. That was just one key insight from BMO’s latest Real Financial Progress Index (RFPI). The survey-based index seeks to capture household economic health, and their perspective on the economy. Not surprising, a good share of the takeaways this year are regarding housing. 

Canadians Are Waiting For Falling Rates To Buy A Home

Most Canadians are on the sidelines waiting for lower interest rates before they buy a home. The survey found 2 in 3 (68%) respondents are holding out for cheaper mortgage rates. Over a quarter (26%) cited rising rates as the reasons they held off on moving. Just under 1 in 5 (18%), felt macroeconomic uncertainty has them hitting pause. 

Prospective homebuyers waiting for falling rates is an interesting insight. Borrowing rates only tend to decline in economic downturns, traditionally the hardest time to buy a home. The moral hazard generated from the excessive stimulus during the last round of cuts, has everyone convinced otherwise. 

Markets where the average person expects state assisted credit stimulus in a downturn is a problem that likely exceeds what most policymakers understand. On the upside, it’ll be interesting to watch. 

Most Canadian Millennials Haven’t Seen Financial Security Improve

Canadians are also experiencing anxiety related to their high cost of housing. High shelter costs were cited as the third most common anxiety trigger (71% of the survey). BMO notes it was only behind unknown expenses (83%), and financial uncertainty (81%). In other words, virtually everyone in Canada is worried about their economic stability to some degree. 

Young adults are split on how to feel about this economic uncertainty, with older households seeing clouds forming. Most (57%) of Gen Z (18 to 24 years old) felt more financially secure than last year. Only a minority (43%) of younger Millennials (25 to 34 years old) felt the same way, with most not seeing an improvement. The former is transitioning from college to a career at that age, while the latter is looking to buy their first home. It’s probably a solid guess this is another housing related issue. 

High Housing Costs Are The Biggest Drag On Prosperity

Just over a third (37%) of Canadians feel high housing costs are holding back their progress. It was the largest self-perceived drag on financial prosperity, followed by monthly bills (34%), and future uncertainty (33%). For context, the share of households that rent their home is roughly the same size as the share that feel high housing costs are holding them back. 

High housing costs are holding households back, but they see cheaper mortgage debt (which stimulates demand) as the trigger to buy a home. Most households are closely watching credit markets for their shelter purchase, but virtually none of them understand how they work. This is going to be quite the show.