Are interest rate cuts a good sign for homeowners, current and future?

As the Bank of Canada cuts its interest rate for the third straight time, one real estate expert says it could help homeowners and buyers alike, but not right away.

“It’s good news that the Bank of Canada is continuing to lower the overnight rate, though we are not likely to see the effects in the housing market for quite some time,” wrote Victor Tran of RATESDOTCA, in a Wednesday statement.

The central bank slashed its overnight rate by 25 basis points to 4.25 per cent on Wednesday.

For every decrease of that size, Tran wrote, a homeowner with a variable-rate mortgage can expect to pay about $15 less in monthly payments per $100,000 of the total mortgage value. Fixed-rate mortgage holders will not see any mortgage rate decreases until renewal.

“It’s just not affordable for people,” Tran wrote. “Mortgage rates have not come down nearly fast enough to stimulate much activity in the housing market.”

To hear him tell it, the reality is that housing market activity in major urban centres like Toronto and Vancouver didn’t take off as much as expected when interest rates were cut in recent months. What’s more, housing prices and mortgage rates remain elevated, Tran wrote.

It will take a significant decrease in mortgage rates before housing market activity picks up again, he writes.

“Though it sounds like a lot, even a drop of a full percentage point from current mortgage rates would not result in a significant increase in buying power, given persistently high home prices,” the Wednesday statement reads.

Take the example of a one-percentage-point decrease on an insured, five-year fixed rate mortgage with a 25-year amortization — to 3.49 per cent from 4.49. This would result in an increase of only about $65,000 in buying power, Tran writes, all while the national average price of a home is about $700,000.

“It will likely take several more decreases in the overnight rate before we start seeing significant enough declines in mortgage rates to spur movement in the housing market,” he said. “It’s going to take more time.”

Phil Soper, president and CEO of real estate firm Royal LePage in Toronto, also expects the impact will happen over time. He projects that many future homebuyers will wait until the Bank of Canada cuts its interest rate even more in hopes that home prices won’t rise.

“I don’t expect a tsunami of demand in 2024,” Soper said in a video interview with CTVNews.ca on Thursday. “I think that’s the overall dynamic we’re living with in the fall of 2024.”

Still, without bidding wars from heightened demand, he suggested some people may find it’s the right time to buy a home.

“It’s not a bad time to be in (the) market because it’s calmer,” Soper said. “You have time to look around, you have time to ponder decisions and you can get a home inspection done. … Housing is cheaper compared to where we were last year.”

He expects housing prices to rise by the spring of next year, typically the busiest time for the market, following more expected rate cuts.