It took six days and the major chartered banks did not pass on the full 25 basis point Bank of Canada target overnight lending rate cut to their prime from 3.00% to 2.85% at the end of January. This was good news for all variable rate mortgage holders whose rate is based off the prime rate (e.g., prime minus 60 basis points). Even better news is that bond yields have dipped further causing fixed rate mortgages to touch new lows. So despite all the talk in the media about interest rates edging up in 2015, we are witnessing the precise opposite scenario. Low rates help keep affordability levels attractive and are obviously a strong positive for the real estate market in the short term.
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While the plunge in the price of oil has certainly hurt the overall Canadian economy and the value of our loonie, it is providing a definite silver lining as far as Eastern Canadian real estate markets are concerned, especially those in Ontario. That's because it has triggered a shift of economic activity from West to East, and with that a "reverse migration" of people will occur. Also the strengthening U.S.economy will provide a big lift to manufacturing exporters, the bulk of which are located in Ontario. The low dollar will help boost even more export sales. All of this is great news for Ontario's employment situation. Finally, the oil patch woes caused the Bank of Canada to cut interest rates at a time when everybody thought they would finally be increasing. It all adds up to a "perfect positive storm" for Ontario real estate! |
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