Pasadena Home Values

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.

The Bank of Canada is sticking to its promise to hold interest rates at the current rate of 0.25% after the latest rate announcement at the end of October. Experts concur 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 level will have been low for over a year. As any real estate agent would tell you, one of the major factors why the Canadian real estate market has seen a good rebound from the recession, is the attractiveness of these low interest rates, which is allowing consumers to buy properties.

However, there are already voices crying out for an interest rate increase. While we are seeing a large bubble forming around the world this is making some people decidedly uncomfortable. Rather than risk the bubble bursting, many think it can be headed off by increasing interest rates. Despite rising prices and a quicker pace in the real estate trade, most of the experts say it is not the time to raise rates.

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 predicted 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 improvement.

The use of leverage, which is a means of using debt to increase investment, is still poor and there are no signs of it increasing. There is more calmness around due to inflation running at roughly -1%. Lastly the housing market has remained fairly steady without the massive fall that has been feared by all. Prices are growing, but the stock flow remains stable. With the housing downturn last winter there was a backlog of properties which are now selling, as the demand is larger so the prices rise.

It’s more than plausible that the Bank of Canada will not break its promise and will hold down interest charges for at least eight more months. At least now the house buyer can feel assured in purchasing their new property.