The existing level of interest rates is to stay at 0.25% after the last rate announcement in October by the Bank of Canada. Many specialists agree with the Bank of Canada’s judgment.
The low figures have already been in operation for 6 months and the bank expect to keep it for another 8 months at least. As any real estate agent would tell you, one of the major factors in the property market recovery and continued prosperity in that area are these low interest rates.
Nevertheless, there are already voices shouting for an interest rate hike. While we are seeing a massive bubble forming around the world this is making some people decidedly uncomfortable. Rather than risk the bubble bursting, many reckon it can be headed off by hiking interest rates. Taking this into account, even with increasing prices in the housing market and faster turnover, the experts still agree that the Bank of Canada has made the right decision.
We need to look at the logic of why the experts don’t believe the interests rates should increase and the main reason is that although the BoC indicated a 2% rise in the third quarter of 2009 the actual GDP growth is completely different. While there are still large debts within the domestic industry, experts believe that increasing interest rates will damage the recovery which is already tortuously slow.
Also, financial indicators don’t show any signs of growing leverage (the risky use of debt to raise return on investments). There is more confidence around due to inflation running at roughly -1%. The other ingredient, is all this is the housing market, which doesn’t seemed to have crashed as expected. Property prices are growing nicely with a good supply on offer on realtors books. A backlog of properties that are now selling are causing an increase in prices as properties are more and more in demand.
It’s more than feasible that the Bank of Canada will not break its promise and will hold down interest levels for at least eight more months. This means reassuring news to any probable condo buyer.
Tags: Canada, interest rates