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Rate hike could spur activity

 

by Neil Sharma05 Nov 2018

The latest interest rate hike might not preclude more buyers—especially first-timers—from the market, it might signal a rush to get into the market while they still can.

“I think it’s already started,” said REMAX INTEGRA’s Christopher Alexander, vice president and regional director for Ontario-Atlantic Region. “Condos are moving pretty quickly, and that’s where a lot of first-time homebuyers are looking to because homes are expensive, but the rest of the province won’t have a dramatic effect. In Toronto, the 905, Kitchener-Waterloo and London, I think we’ll see an uptick in action.”

The most recent rate hike is the fourth one in the last 18 months, and Alexander says the worst of the market turbulence is in the rearview mirror. Sales and pricing have been up since June, and it’s having a positive effect up the chain.

“Prices have increased and sales have too, year-over-year,” he said. “It took a while for buyers to catch up, but first-time homebuyers are back and it’s helping move-up buyers and having a good ripple effect all the way up. I think the difference now, compared to six months ago and the last rate hike, is the federal government has lifted its promise to move slowly hiking the interest rate. I still don’t believe it wants to cripple the market or have a dramatic effect on the economy, but I’m predicting buyers will want to come out and get ahead of the curve.”

Stephen Poloz, governor of the Bank of Canada, says that policy rates need to reach neutral levels, which is estimated to be 2.5-3.5%, and much of that will be contingent upon global trade policy developments, which have been turbulent in recent times.

“The Canadian economy has solid momentum and continues to operate near its capacity,” said Poloz. “The policy rate will need to rise to neutral to achieve our inflation target.”

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