The Bank of Canada’s decision to raise interest rates on Wednesday is not expected to cool the country’s frenzied real estate market, with homebuyers still able to get cheap mortgages to compete for properties.
Bank of Montreal chief economist Douglas Porter said it is unlikely that Wednesday’s rate hike will have any significant impact on a housing market with as much momentum as Canada’s. “I suspect rate hikes would really begin to bite when we get to 100 basis points,” he said. “It’s very desperate here,” said Kelli Tynes-Harrington, realtor with Royal LePage Atlantic, who has sold homes in the Halifax area for nearly two decades.
In announcing its decision to raise the overnight lending rate, the Bank of Canada pointed to Russia’s invasion of Ukraine as a major new source of uncertainty in addition to the ongoing problems from the pandemic. However, with the Canadian economy continuing to grow and inflation soaring well above the central bank’s target of 2 per cent, the bank’s governing council said it expects interest rates will need to rise further.
Frances Hinojosa, mortgage broker and president of Tribe Financial Group, agreed, saying Wednesday’s rate hike will likely have a “psychological impact” and “cause buyers to rush into the market.”
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