Mortgage rate increases will diminish interest in real estate: survey

Ahead of a rate decision from the Bank of Canada this week, a new survey from Zoocasa suggests an increase in mortgage rates will further weigh on real estate sentiment.

A survey from Zoocasa published Monday showed 79.1 per cent of respondents said a further increase in interest rates, which are closely tied to mortgage rates, would negatively affect their interest in real estate.

That sentiment was higher than a previous survey conducted by Zoocasa in the spring, when 71.3 per cent of respondents said a rate increase would negatively impact their interest in real estate. 

The increase suggests that “both affordability and real estate market sentiment have deteriorated over the past few months,” Zoocasa said.

Concern over potentially higher mortgage rates was more pronounced among first-time buyers, according to the survey.

“Of respondents who said they were first-time homebuyers, the effect of uncertain economic conditions is even more apparent, with 86.3 per cent of first-time homebuyers saying further increases to mortgage rates would negatively affect their interest in real estate,” the survey said. 

RATE DECISION COMING

The survey results come days before an interest rate decision is expected from the Bank of Canada. A majority of economists expect the central bank will hold its policy rate at five per cent on Wednesday. Since March 2022, the central bank has hiked interest rates to five per cent from 0.25 per cent. 

The Zoocasa survey was conducted after the Bank of Canada held interest rates at five per cent last month, and 23.3 per cent of respondents said that rate decision had a positive impact on the real estate market. 

However, 16.1 per cent of respondents strongly disagreed that the rate pause had a positive impact, while 38.8 per cent had a neutral response. 

GOVERNMENT POLICY 

The survey also found that 38.9 per cent of people said they strongly disagree that the Canadian government is doing enough to address housing shortages. 

Only 12.2 per cent of respondents agreed the government is doing enough to address housing affordability.

“As the government aims to welcome 485,000 newcomers in 2024 and 500,000 in 2025, the demand for housing will grow and unless more effort is put into boosting supply, inventory struggles will continue,” the survey said. 

SOURCE: https://www.bnnbloomberg.ca/increase-in-mortgage-rates-will-diminish-interest-in-real-estate-survey-1.1988380