Canadian Interest Rates to Hold Steady
// July 13th, 2010 // Real Estate
The Bank of Canada is persisting with its promise to hold interest rates at the current level of 0.25% after the latest rate announcement at the end of October. This decision was exactly what experts accept to be the way forward for Canada.
The rate has been kept at record lows for half a year now and the Bank wants to keep it fixed at least till June 2010. As any real estate agent would tell you, one of the major ingredients as to why the Canadian housing market has seen a good rebound from the recession, is the attractiveness of these low interest rates, which is allowing consumers to buy properties.
Sadly there is always a few that clamour for interest rate hikes. Huge bubbles around the world made people cautious. Many feel the best way to stop the bubble before it explodes is to raise interest rates. Regardless of rising prices and a faster pace in the real estate market, most of the experts say it is not the time to raise rates.
The most decisive reason is the confirmed growth of the GDP, which doesn’t seem to be following the BoC forecast of a 2% rise in the third quarter of 2009 (August growth was -0.1%). Additionally, the trade deficit is at a record high, what shows a more arduous recovery for domestic industry.
The use of leverage, which is a means of using debt to supplement investment, is still poor and there are no signs of it growing. There is more calmness around due to inflation running at approximately -1%. Lastly the real estate market has remained fairly steady without the massive fall that has been anticipated by all. Real Estate prices are growing nicely with a good supply on offer on realtors books. With the real estate downturn last winter there was a hoard of properties which are now selling, as the demand is greater so the prices rise.
It is very improbable that the BoC will retreat on its commitment to keep interest rates low till at least June 2010. At least now the home buyer can feel positive in buying their new property.
