The Bank of Canada announced a quarter-percentage-point cut on Wednesday, its first reduction in more than four years, meaning its key interest rate now stands at 4.75 per cent.

Homebuyers have been waiting for clear signs of declining mortgage rates before going ahead with purchasing a property. As borrowing costs decrease over the next 18 months, more buyers are expected to enter the market, including many first-time buyers. There certainly is pent-up demand.

Typically, when interest rates go down, prices go up. This would be the time when people come off the sidelines, knowing and anticipating that prices are likely to rise.

People purchase homes less so on the actual sale price of the property, but more so on the monthly carrying costs of the property. Interest rates going down will, over time, lower monthly carrying costs and that will ease some of the burden that homebuyers feel, particularly first-time buyers, if they’re feeling stretched.

Looking forward, as demand picks up, we will likely see renewed upward pressure on home prices as competition between buyers increases.