Bank of Canada holds rates steady   Why now might be the right time to buy

The Bank of Canada (BOC) recently announced it will continue to hold its overnight rate steady at 5%, signalling that despite cooling inflation, it’s still too soon to ease monetary policy.


This news is disappointing for those waiting for rates to drop before entering the market to buy a home. Understandably so, as the cost of borrowing money, combined with rising house prices here in Calgary, has significantly increased the cost of home ownership. 

Logistically, waiting for rates to come down in the short term makes sense. A shorter-term wait now could mean long-term savings. But what if it doesn’t end up that way?
Read on to learn more about the BOC’s announcement and what rate drops could mean for the Calgary real estate market.   

Why did the Bank of Canada keep rates steady?

Inflation eased more than expected in early 2024. Since the BOC's last hold in January, there have been no “big surprises” in Canada’s economic data and outlook. So why not drop rates?

Well, one reason, says TD Bank senior economist James Orlando, is that the stronger-than-expected GDP figures in late 2023 have put little pressure on Bank of Canada officials to lift rates and stimulate the economy. 

But it’s also worthwhile looking more closely at inflation. 

While annual inflation cooled over January, declining to 2.0 % from 3.4% the previous month, specific components of the consumer basket, such as food, health, and personal care, are still hovering above 3%.

Among the highest in the consumer basket? Shelter. In other words, housing. 

In fact, BOC Governor Tiff Macklem highlighted “persistently high shelter inflation as the biggest contributor to the rising cost of living”, suggesting that the BOC is at least somewhat cautious about the impact rate drops may have on the cost of housing. 

Enter the Calgary real estate market

Despite one of the fastest rate hike cycles in Canadian history, the Calgary real estate industry continues to set price appreciation records into 2024. Why? Well, simply put, supply and demand.

Over the past two years, Calgary has seen unprecedented numbers in both interprovincial and international migration. The influx of new Calgarians stimulated record demand for housing, with historically low supply levels. 
To give some perspective, supply levels did actually increase this February. However, with four sales for every five new listings on the MLS, the increase in listings did little to ease inventory supply. 

As a result, in February 2024, 2134 homes were sold, up from 1738 in February 2023, a nearly 23% increase — leading to a 10.3% increase in the benchmark price over the previous year.

What does this have to do with interest rates?

Great question.  Most of it comes down to basic laws of supply and demand. 

With the benchmark rate steady at 5%, buyer confidence increases. Many economists and investors anticipate that if or when rates do come down, a wave of new buyers is likely to enter the market, further increasing demand.

Combine that with an already competitive Calgary real estate market hungry for supply, and, you guessed it, prices go up. 

It is impossible to predict how many people are waiting for interest rates to drop and how rate drops will impact prices. Yet, there’s a potential scenario in which many buyers waiting out rate drops end up paying significantly more for a house than they would today.

Situation. Situation. Situation.

What should you do? 

At TB Real Estate Team, we counsel clients to balance current events and market speculation against their current situation.

In other words, when deciding when and where to buy a home, trying to time the market should never take precedence over your family’s circumstances. 

For example, suppose you can buy the home you need within your price range and comfortably afford payments at current interest rates. In that case, it might be worthwhile to weigh out the options of buying now versus waiting for rates to come down and ending up in a situation where prices are higher, and there’s even more competition.

On the other hand, if you are in a position where taking on a mortgage at current rates would stretch your family’s budget beyond what is manageable, then making a potentially detrimental financial decision based on speculation is not advisable. 

As we like to say at TB Real Estate, it’s all about situation, situation, situation. 

So, if you're considering a move and want professional guidance, don’t hesitate to reach out