“My concern is that the cut won’t be useful in growing demand in slower markets and in Canada’s largest cities," Phil Soper, president and chief executive officer of Royal LePage, told REP. "The current cut was having a strong impact already so you didn’t need to pour gasoline on the fire.
“We were already operating in an ultra-low environment and there’s no reason to tempt fate to where we’ll see a hard correction down the line.”
The move to cut the rate was the second reduction this year after a similar reduction in January.
Soper believes that the Bank of Canada should have held off cutting interest rates to avoid sending home prices even higher. He also said it will have an impact on Canadian lenders as they lower their own prime rates, which controls the pricing of variable-rate mortgages.
“The lower outlook for Canadian growth has increased the downside risks to inflation," said the Bank of Canada in a statement. "While vulnerabilities associated with household imbalances remain elevated and could edge higher, Canada’s economy is undergoing a significant and complex adjustment. Additional monetary stimulus is required at this time to help return the economy to full capacity and inflation sustainably to target.”
The rate cut is welcome news to some agents. “I think it’s a good thing and it will stimulate growth for Toronto (and Vancouver),” Elli Davis, a real estate agent with Royal LePage, told REP.
“It’s hard to predict what the impact of another rate cut will be in smaller markets but I expect activity and prices to elevate even more if they cut the interest rate.”
Danny Fini, a real estate agent with The Red Pin, also gave his thoughts on the possibility of a rate cut, saying that a housing correction could come more quickly if the BoC cut the rate by 25 basis points.
“We’ve certainly seen a lot more sales from first-time homebuyers and I expect that would increase even more if the BoC was to cut the interest rate but at the same time, I’m hearing a lot of worry from buyers in the market about the possibility of the bubble popping," he said.
“I tell buyers all the time – in this market, spend within your limits and don’t buy a house that you can’t afford.”
The Bank of Canada has slashed its interest rate to 0.5 per cent to further stimulate the economy and, while the move is a welcome sign for some agents, not everyone is singing Kumbaya around the campfire.