Canadalend.com, the leading low-cost, private mortgage solution provider in the country, comments on the Bank of Canada’s recent decision to lower its key lending rate and says the rate cut will not encourage Canadians to take on too much debt nor over-stimulate the national housing market. —
“On July 15, the Bank of Canada announced that it lowered its benchmark lending rate to 0.5%; the second time the Central Bank has dropped its rate this year,” says Bob Aggarwal, president of Canadalend.com. “The overriding fear is the banks decision to cut the overnight lending rate, which influences what commercial banks offer to homebuyers, will add fuel to Canada’s red-hot housing market.”
In June, Canadian home prices rose to a record high; the sixth consecutive monthly increase. The increase was led by housing prices in Vancouver which rose 8.5% year-over-year and Toronto, where prices increased 7.8%. Vancouver and Toronto account for 54% of the housing price index. Outside of these two markets, average prices have risen less than two percent and have fallen in nine major cities. (Source: Teranet.com, data set, July 14, 2015; http://www.housepriceindex.ca/)
Aggawal explains that because they are supported by strong economic and population growth, housing prices in Toronto and Vancouver will most likely continue to outpace the rest of the country which is experiencing modest growth or is a buyer’s market. While on paper, the rate cut from 0.75% to 0.50% represents a 33% drop, in real terms, it was small. As a result, the impact it will have on borrowing and affordability will be minimal.
“This also means the most recent rate cut will not over-stimulate Canadian housing prices. While housing prices will continue to trend upward, for the vast majority of first-time home buyers, growth will be moderate,” Aggarwal adds. “The fact is, the small rate drop will impact variable rate mortgages. But it is five-year fixed rates that impact the housing market because it’s the rate that borrowers must be tested against to qualify for a mortgage.”
“At least, this is the case with the big banks. Fortunately, the lending landscape has changed over the last number of years and there are a lot of different lenders willing to work with first-time home buyers or those looking to refinance,” Aggarwal concludes. “The independent, licensed agents at Canadalend.com can help those looking to step onto the property ladder or refinance to find the best financial products at the best rates.”
Canadalend.com is one of the largest, most trusted private mortgage brokers in Canada, with skilled independent, licensed professionals helping Canadians coast-to-coast. Canadalend.com provides its clients with residential and commercial mortgages, home equity credit, debt consolidation, and addressing financing concerns. To learn more about Canadalend.com, visit the web site at www.Canadalend.com.
Release ID: 87782