Interest Rate vs. Real Estate Market

Interest Rate Heats Up GTA Real Estate Market

Real Estate Market Across GTA is Booming ! Following the drop in the price of crude oil (less than $50 (U.S.) per barrel) the Bank of Canada cut

the overnight interest rate by a 0.25 per cent to 0.75% (The overnight rate is the interest percentage is used by banks and other lending institutions to lend money to each other on a daily basis). As of today, Thursday, July 23, 2015 the overnight rate has dropped to 0.5%. The prime interest rate (the interest rate at which banks lent to prime customers) in major banks is now dropped from 3% to 2.85% and now to 2.7% (July 23, 2015). The Canadian dollar ended the day at its lowest level in more than a decade for 76.7 U.S cents. Interestingly, it is not the end yet!

 How does it affect the housing market? We expect to see stronger housing market across the GTA in next few months and the average price will most likely increase as the demand raises. Now the question is “How long this recession will last?”
According to the senior foreign-exchange strategist- Mazan Issa : “The economy is in a technical recession and as the data continued to unfold, it became increasingly obvious the economy is continuing to struggle with an oil shock that is much deeper and much more prolonged than previously anticipated.”
The investors who rely on income from bank-issued guaranteed investment certificates will not be certainly happy about the interest cut and will look for safer investment in real estate. Reducing the prime rate by major banks makes investor more worried about the overheated housing markets in Vancouver and Toronto.
The current Canada’s overnight rate is still double the U.S. Federal Reserve’s policy rate which creates opportunities in real estate investment at this low rate environment.
The booming areas in Oshawa, Caledon, Hamilton, Aurora, Brampton and Richmond Hill can be potentially hot spots for home buyers to take advantage of low energy prices.

Categories: Greater Toronto Area Real Estate Updates