Canada: Rate Cuts Can Worsen Affordability

There’s a common belief that lowering interest rates will instantly make homes more affordable—but the reality in Canada is more complex. Recent central bank research highlights that while rate cuts quickly spark a rise in housing demand, the supply side takes much longer to catch up. Here in our local markets, we see resales pick up soon after rates drop, but the real surge isn’t felt until 18 to 24 months later. New housing starts, especially the multi-unit projects we rely on for growth, may not ramp up for another two years. Strong job markets can make this effect even more pronounced, as more buyers feel confident to act. From my experience marketing homes across Metro Vancouver, it’s clear that while lower borrowing costs help buyers move faster, true affordability requires a much broader approach. Builders face long timelines for approvals and planning before they can bring new supply to the market. So, while rate cuts do eventually support more housing, they’re not a quick fix for affordability challenges.