Soaring House Prices Could Return As Interest Rates Head To Zero: BMO
housing prices central ab
“When you’re looking at a market that becomes driven by wealth … there isn’t necessarily a limit to house prices.”
08/10/2019 06:49 PM EDT
By Daniel Tencer

The recent slowdown in Canada’s hottest housing markets is turning a corner and a potential new price boom is threatening to frustrate would-be buyers’ hopes.

The real risk to Canada’s housing market today is not a crash, but a return to nosebleed levels of price growth thanks in part to falling interest rates, said Doug Porter, chief economist at Bank of Montreal.

Policymakers will have to “be ready to wield some tough measures” if they want to prevent housing costs from becoming even more unaffordable, Porter told HuffPost Canada ― though he said he would “leave it to policymakers” to decide what those should be.

save on real estate

The latest data from the Toronto and Vancouver real estate boards show the markets shaking off foreign buyers’ taxes and the mortgage stress test. Home sales jumped 24 percent in both cities in July, compared to a year earlier.

Much of that has to do with more affordable mortgages. The collapse in interest rates on government debt around the world in recent months has pushed down the rates Canadian lenders can offer.

According to comparison site Ratehub, mortgage rates in Canada recently hit their lowest levels since July 2017, and are near all-time record lows. The lowest fixed rate available at the site is currently 2.39 percent, a drop of 0.8 percentage points since the start of this year.

The Bank of Canada’s posted rate, which is used in the mortgage stress test, has also come down, to 5.19 percent, from 5.39 percent.

This “simply pounds home the point that rates will remain low for long — or forever,” Porter wrote in a client note…

Read the full article at
low commission