Canadians await rate cuts to boost spending, with 65% saying lower rates will improve financial wellbeing
High interest rates have significantly impacted the financial wellbeing of Canadians for over a year, with many calling for immediate rate cuts.
While one-third (32 percent) of Canadians expect the Bank of Canada to begin dropping rates on June 5, more (42 percent) believe there will not be a cut announced this time.
According to the Dye & Durham's Canadian Pulse Report for Q2 2024, a survey of over 1,500 Canadians conducted via the online Angus Reid Forum, two-thirds (65 percent) of Canadians say lower interest rates will positively impact their financial wellbeing.
Nearly two-fifths (38 percent) have held off on making a major purchase in the past year due to high interest rates. Among the 42 percent who expect to make a major purchase once rates decline, more than half (57 percent) intend to wait for significant cuts before spending on larger items.
"It's clear that higher rates have done their job, cooling consumer spending significantly and helping to bring inflation down to much more manageable levels," says Martha Vallance, chief operating officer, Dye & Durham.
"Consumers have said they're ready to start spending again and are just waiting for the Bank of Canada to make its move, though few should expect rates to return to where they were before. Industries like real estate, automotive sales, construction and more – along with those industries that play critical roles in supporting them – should take note and prepare for a fast-moving market once meaningful cuts are made."
Most Canadians believe lower interest rates will make it more affordable for them to purchase or put money towards various expenses.
These include mortgage costs (81 percent), the purchase price of a new home or property (70 percent), the sale price of an owned home or property (66 percent), and home renovations (65 percent).
Additionally, lower rates would help with personal or emergency savings (58 percent) and RRSP or retirement savings (48 percent).
For those planning a major spend once rates decline, the most common purchases are a new car (15 percent), a new home or primary residence (14 percent overall, 24 percent for renters), or a significant home renovation project (12 percent).
High-rate mortgage renewals could lead to a wave of refinancing later this year. Many Canadian homeowners who renewed their mortgages in 2023 and 2024 have been stretched by high interest rates, with some seeing their monthly mortgage payments increase significantly.
More than two-in-five (41 percent) of Canadians with a home mortgage plan to refinance once rates decline, with Albertans (58 percent) particularly seeing this as a way to reduce monthly expenses.
Renters are closely monitoring the Bank of Canada's decision, viewing lower interest rates as a chance to enter the housing market.
Nearly three-in-five (57 percent) say lower rates will make it easier to buy a home in the future, with nearly as many (50 percent) believing lower rates will increase their likelihood of purchasing a home.
For younger Canadians (18-34), lower rates are seen as making it easier to afford the purchase price of a new home (76 percent) and more likely (70 percent) that they will eventually be able to buy one.
The number of Canadians planning to sell their primary residence and move to a new one in the next twelve months has remained unchanged from Q1 2024 and Q4 2023, with 12 percent currently planning to do so.
However, slightly fewer (16 percent, down from 18 percent in Q1 2024) plan to wait until sale prices increase before selling their property.
Artificial intelligence (AI) continues to be a prominent topic among Canadians. However, discomfort with skilled service providers using AI has increased over the past quarter.
Nearly two-thirds (63 percent) are uncomfortable with doctors or medical providers and lawyers or notaries using AI, up from 62 percent and 61 percent respectively in Q1 2024.
More than half also express discomfort with investment, financial, or tax advisors (58 percent), insurance brokers (55 percent), mortgage brokers (54 percent), and real estate agents or brokerages (52 percent) using AI.
"It's clear that there is still a very large education piece that skilled service providers need to be mindful of to help their customers get fully on board with AI," says Scott Bleasdell, chief product officer, Dye & Durham.
“The average Canadian still wants to know that a human is involved in the process, even if AI is doing a lot of the heavy lifting. Transparency about how AI is and isn't being used and the benefits it provides to the client will be critical in helping legal professionals and other skilled service providers foster widespread acceptance of AI use in their offerings.”
