The Bank of Canada followed the U.S. Federal Reserve today and cut its key interest rate by half a percentage point. This is the first cut the bank has made in four years, bringing the rate to 1.25%, they also made it clear that further cuts were possible if needed to fight the threat of the coronavirus to Canada’s economy.
This will obviously help Canadians spend even more, and could spur further activity in the real estate market. The mortgage rates will likely test previous lows last seen in 2016. In fact, we now have seen HSBC offering a 3 year fixed insured mortgage rate of 1.99%
However, what is unknown is whether or not this drop in mortgage rates will have a negative effect on consumer sentiment coming from the stock market and Coronavirus. So far the market looks resilient, with February home sales in Greater Vancouver up 45% year-over-year.
Canadian mortgage credit growth is still picking up, and is now the highest it’s been in months. The 5.1% 12-month increase in February marks the tenth consecutive month of acceleration. It’s now at the highest rate of growth since February 2018. This acceleration of growth is likely to rise in the near term.
Just in time for B-20 Stress test Guidelines to get adjusted, to allow bigger mortgages.