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The Bank of Canada is sticking to its commitment to hold interest rates at the current level of 0.25% after the latest rate announcement at the end of October. Specialists acknowledge it is not the time to change it.
The bank is expecting to keep the current rate until at least June 2010 which will mean the rate will have been low for over a year. As any real estate agent would tell you, one of the main factors in the housing market improvement and continued prosperity in that area are these low interest rates.
Interest rate rises are being demanded by certain individuals. Massive bubbles around the planet made people cautious. Quite a few feel the best way to stop the bubble before it bursts is to increase interest rates. Despite rising prices and a faster pace in the real estate business, most of the experts say it is not the time to raise rates.
We need to look at the reasoning behind why the experts don’t believe the interests rates should increase and the main reason is that although the BoC forecasted a 2% rise in the third quarter of 2009 the actual GDP growth is completely different. One of the other aspects concern the domestic industry which is still observing very high levels of trade deficit and therefore a slower recovery.
The use of leverage, which is a means of using debt to increase investment, is still nominal and there are no signs of it increasing. At the moment the market seems to be secure with inflation approximately -1%. The other consideration, is all this is the housing market, which doesn’t seemed to have crashed as predicted. Prices are increasing, but the inventory flow remains steady. With the housing downturn last winter there was a hoard of properties which are now selling, as the demand is larger so the prices rise.
While there are never any guarantees it is fairly certain that the BoC will fulfil its assurance to keep the interest rates low for a good few months yet. This means encouraging news to any potential condo buyer.
