Interest Rates to Be Held at Their Current Rate
The present level of interest rates is to hold at 0.25% after the last rate publication in October by the Bank of Canada. This verdict was exactly what specialists accept to be the way forward for Canada.
The bank is hoping to keep the current level 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 reasons 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 buyers to buy properties.
However, there are already voices crying out for an interest rate hike. Gigantic bubbles around the world made individuals cautious. Rather than risk the bubble bursting, many think it can be headed off by increasing interest rates. Many specialists still believe that in spite of increasing prices and these bubbles forming it would be a mistake to increase interest rates at this moment in time.
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 considerations 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 growing. Inflation is close to -1%, leaving all concerns behind for the time being. The other consideration, is all this is the housing market, which doesn’t seemed to have crashed as predicted. Prices are growing, but the stock flow remains constant. 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.
It is very improbable that the BoC will retreat on its commitment to keep interest rates low till at least June 2010. Reassuring news for condo purchaser!