Why no rate hike means variable mortgages are safe again
A signal from the Bank of Canada that it’s not raising its key lending rate any time soon, coupled with the likelihood of falling mortgage rates, could be enough to keep the latest housing rally going.
There have been signs the housing market is in recovery mode with year-over-year sales rising in many markets, albeit generally below 10-year averages. Analysts have called it a short-term blip caused by consumers rushing to buy to take advantage of preapproved mortgages signed 120 days ago when long-term rates were lower.
But with the Bank of Canada signaling last week it won’t be raising rates – its neutral stance could even mean lower rates – consumers can safely slide back into variable mortgages tied to prime that track the central bank rate.
The short-term rate option and the possibility long-term rates will follow has people worried the market may be recovering too fast for the taste of Ottawa, leaving Finance Minister Jim Flaherty with no choice but to tighten lending rules again.
Click here for the full Financial Post article.