06:27 AM EDT, 09/17/2024 (MT Newswires) -- The Bank of Canada's initial rate cuts have had little effect on

housing demand as existing home sales rose 1.3% month over month in August but are still down moderately from a year ago, noted Bank of Montreal (BMO).

As the Canadian Real Estate Association said, the market is in a "holding pattern" awaiting more rate relief. Further rate cuts will no doubt spur a recovery, though the bank suspects a shallow one initially due to affordability issues in Ontario and

British Columbia.

However, lo and behold three new mortgage rule changes (effective Dec. 15) could speed things along, stated BMO. The changes will allow all buyers to get a longer 30-year mortgage for a new build, first-time buyers to get a similar term for all properties --both new and old -- and buyers to get an insured loan on a home priced up to C$1.5 million versus C$1.0 million currently.

The latter change will allow for smaller down payments and lower borrowing costs compared with an uninsured loan, according to the bank. The five-year extended term will lower monthly mortgage payments by about 9%.

One risk, however, is that if the Bank of Canada cuts rates much more than expected, the housing recovery could take

flight, resulting in higher prices that erode the affordability gains of these new measures and the country lands back at square one, added BMO.