As interest rates drop, more Canadians are willing to spend more… finally: Research

Many Canadians are planning to put down more cash to make a big purchase if interest rates fall, but most will wait until the Bank of Canada cuts before they can withdraw, a survey has found.

Forty-two percent of respondents to a quarterly consumer opinion survey conducted by Dye & Durham (D&D), a Toronto-headquartered law firm, said they were ready to use money at “great price” after discount. and 38 percent said they did not buy a big ticket because the fees are high.

“It’s clear that many Canadians are reluctant to buy essentials because of high prices, and their patience is wearing thin,” said Martha Vallance, D&D’s chief operating officer. he said in an email. Yahoo Finance Canada.

The study shows, however, that reducing the initial rate will not generate much enthusiasm for use. Most of those who plan to buy more are waiting for “multiple and/or major improvements to happen before they jump in,” Vallance says. Only four percent of respondents said they intend to buy immediately after a rate cut, while 14 percent said they would wait “less” and 18 percent wanted a “big” cut. “.

“That measured sentiment, coupled with the possibility of gradual rate cuts by the Bank of Canada, leads us to believe that while people will see the initial rate cut as a reversal, a return to higher levels of spending in “It’s not going to happen right away. It’s not going to be strong and it’s not going to cause more price pressure,” Vallance said.

A new car (15 percent), a new home (14 percent) or starting a major renovation project (12 percent) is at the top of the respondents’ list of expected prices to be discounted.

Hopes for a June rate cut in Canada are muted in the survey. Just over 40 percent of respondents said they do not expect a decrease in June. About 31 percent say a reduction will occur in June, while 28 percent are unsure. Sixty-five percent of respondents said the interest rate cut would improve their financial well-being, while 30 percent said the cut would have no impact. Meanwhile, five percent say a rate cut will make their situation worse.

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Housing trust

The survey suggests that the housing market in particular, which has cooled in recent months, could see an extended recovery. A large majority (81 percent) of respondents said that reducing rates would make their housing costs more affordable. About 41 percent of homeowners say they are willing to refinance their mortgage when rates start to fall.

Seven in 10 respondents said the cuts would make new housing more affordable, while 66 percent said existing housing would become more affordable. Almost as many – 65 percent – say it will be easier financially to fix the houses.

14 percent of respondents said they intend to buy a new home once rates start to drop. Among renters, 50 percent say lower rates would increase their likelihood of buying a home. That number rises to 70 percent among new hires in the 18-34 age group.

The survey surveyed 1,516 Canadians between May 7 and 9. D&D notes that “for comparison purposes only, a probability sample of this size has an estimated margin of error of +/- 2.5 percent, 19 times out of 20.”

John MacFarlane is a senior reporter for Yahoo Finance Canada. Follow him on Twitter @jmacf.

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