With the latest Bank of Canada (BoC) rate cut to 0.50% comes a reminder that many would like us to believe our housing market is tenuous. Once again there is a lot of discussion about just how overheated our market is and the dire circumstances many current home buyers are likely to find themselves at renewal time.
First, let’s think about why the Bank of Canada decided to cut interest rates once again last week. In January the BoC surprised many of us and cut the overnight rate in response to a rapid decline in oil prices. This time around it did so because the Canadian economy has not rebounded the way the Bank had hoped.
In an effort to stimulate spending, the Bank used one of its levers to lower the cost of borrowing. In doing so the value of the loonie further decreased thereby making imports more expensive and exports cheaper. The hope is that foreigners will both invest in and buy Canadian goods. The caveat to that appears to be Canadian real estate where many economists and policy makers would prefer that no additional investment takes place. The problem is, it’s hard to have it both ways. Continue reading “How the recent rate cuts may impact mortgage regulations”