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Mortgage Broker News | 07 Jul 2015, 08:50 AM Agree 0
Speculation has begun to swirl prior to the next Bank of Canada rate meeting, with one economist vehemently arguing against further cuts.
  • Dustan Woodhouse | 07 Jul 2015, 10:25 AM Agree 0
    With all due respect, the proposed cut would possibly benefit the approx 1 in 16 households in a variable rate mortgage. 8 of 16 have no mortgage, the other 7 are in fixed rate product.

    As far as 'increasing debt levels' that is not a byproduct of a BoC rate cut specifically as teh qualifying rate for a Variable rate mortgage remains well above 4%, currently at 4.64%.

    A BoC rate cut would have little impact on longer term fixed rate mortgage rates, as lenders have already shown that even when the bottom falls out of the Bond market as it did in late January 2015 they are only willing to share so much of the wealth. 5yr fixed rates did not drop in lockstep with teh bond rates, instead lenders had an incredibly nice margin on 5yr fixed product.

    It is far more complex an equation than CoC rate cut = higher prices.

    I can only speak for myself but the majority of my clients still borrow significantly less than their incomes qualify them for. They build in their own buffer.

    I also have not had a single client tell me that low rates are why they are buying. Instead they are buying becuase they have good jobs, are getting married, have an expanding family, have been transferred into BC, or are getting divorced, downsizing, or buying a recreational property.

    In other words life events and emotions appear to be the key market drivers.

    We Canadians are a far more self regulating bunch than we give each other credit for.
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