By Vernon Clement Jones
An “election reprieve” from interest rate hikes may not translate into the busy spring season brokers were hoping for, with industry leaders identifying a possible downside to the federal campaign.
“Elections usually prove to be a distraction for buyers,” Chad Robinson
, president of Best Interest Mortgages, told MortgageBrokerNews.ca
, the same day opposition parties handed Prime Minister Stephen Harper his election mandate. “The campaign rhetoric tends to breed uncertainty and potential buyers tend to adopt a wait-and-see approach because of it. That’s especially true in my market, Ottawa.”
More than 20 percent of Capital voters are directly employed by the government, with another 25 percent dependent on federal contracts. Robinson and other Ottawa brokers are now bracing for a possible slowdown as the country shifts into election mode.
They’re not alone.
Industry professionals from across Canada voiced similar concerns as they gathered in Toronto for the CMP Mortgage Workshop, part of the Canadian Real Estate Investors Forum. Still, many brokers told MortgageBrokerNews.ca they expect the run-up to a May 2 election will have little impact on spring buying.
Historically, say economists, the Bank of Canada avoids ratcheting up interest rates during an election, a way of distancing itself from partisan squabbling. A sluggish global economic recovery, a high-flying Loonie, conflict in the Middle East and spiking oil prices have also quieted concerns the Bank would move as early as April to raise its key interest rate, now 1.0 per cent.
Ottawa’s move to tighten mortgage rules earlier this month should also keep the Central Bank from nudging its overnight rate higher.
Last week CIBC joined other big banks in adjusting its forecast, suggesting Governor Mark Carney
won’t make that move until at least July.
That could give homebuyers a three-month window to find a property and move to closing before prime rates climb upward. It’s unclear how many will take that opportunity, said Rishi Sharma, a mortgage professional with Centum in Mississauga also attending the CMP Mortgage Workshop. He remains optimistic
“Election or no election, people are still going to be buying houses,” he said. Clients may, in fact, see past the uncertainty of the election and find real incentives to move ahead with new mortgages or refinance ahead of a fall rate hike.
“Many know where they stand now,” said Sharma. “They know what the interest rates are; they know what’s on the market and they know what their personal finances are. In the fall, they may not.”
Still, brokers may have already experience this year’s boom in the weeks leading up to Ottawa’s mortgage changes on March 18.
“We saw a 50-per cent uptick in business in the weeks leading up the changes,” Robinson said, offering another possible reason brokers could see a slower spring season.