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Mortgage Broker News | 22 Aug 2014, 10:26 AM Agree 0
One reader believes variable rate mortgages will continue to be the best option for clients going forward, following one big banks market forecast for 2015.
  • Angela Wong-Liao - Invis Inc | 22 Aug 2014, 11:10 AM Agree 0
    After 40 years in the banking/financing industry, I am not surprised that we are edging towards the end of the boom cycle. Yes, I fully agree one of the major driver for the housing boom is pricing, our current interest rates are in an all times low and when interest rates inches up in 2015 and subsequently normalize the interest rates to around 4-5%, real estate market will slow down but I believe in a more soft landing result versus a crash. In my opinion, Canada has one of the most stable and regulated banking system in the world, our Canadian banks will not resulted in an American style melt down as in 2008.
  • Layth Matthews | 22 Aug 2014, 11:52 AM Agree 0
    The tricky thing about this forecast is that it implies interest rates "normalizing" at a time when home values are flat or declining. If home prices are weak the reverse wealth effect alone would tend to put downward pressure on Canadian mortgage rates, not to mention the weak employment in the housing sector.

    The real concern is that the US recovery creates international demand for capital, which could raise Canadian mortgage rates in an untimely fashion, i.e. despite our soft housing market.

    I think this forecast means that prime rate will remain low just that much longer as it is the only interest rate that the Bank of Canada can control - almost directly. So variable rate mortgages are still the risk adjusted best way to go!

    International demand for capital can drive up fixed rates and can shrink the available discount on variable rates. But if the housing market/employment is weak the BOC can at least hold down prime.
  • Kuldip S panesar Homeland Mortgage Corp. | 22 Aug 2014, 04:14 PM Agree 0
    This forecast is based only on Interest Rate in Canada the housing market is not in boom at this time ,it is stable or declining. Interest rate alone is not only one factor that regulates the real estate market. Interest rate is determined by the demand and supply of the money . If the rate of interest go up more money will be come in the market and the rate of interest will be settled down.BOC is also watching the system all the times and interfering in the money market by changing the overnight rate. Keeping in view all economic factors of Canada and USA it cannot be predicted that interest rate will go up and crash the real estate market.
  • Victor Simone | 22 Aug 2014, 05:11 PM Agree 0
    @Layth Matthews
    So true about Canada's domestic interest rates, being a reflection of the global demand and competitive pressures for money. Canada's real estate market has been lucky these past years, in that the low interest rates are in vogue all over the world. There seems to be no real fight for higher rates. Ten and twenty years ago there was just so much more rate movement.

    Until nations really start to compete for money again, Canada will continue to enjoy some of the lowest interest rate ever.
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