The BOC (Bank of Canada) has a media lock-up planned for October 24, 2018. The briefing will be held at the BOC’s headquarters in Ottawa. Reporters will be given the privilege to review the rate announcement, report and press release. Last meeting on September 5, 2018 the BOC decided to keep interest rates at 1.50%; but sentiment in the rhetoric presented in the press conference pointed towards future hikes. We did have a hike in the summer on July 11, 2018 from 1.25% to 1.50%. With the likely hood of interest rates to rise to 1.75%, this will likely have a domino effect on the Canadian dollar giving it a small boost in the short term. However, in the long term this can cause an inflation domino effect like the financial crisis of 2008.
What does this mean for Real Estate?
Rising interest rates in the real estate market can be take in 2 ways as a positive or a negative depending on a variety of factors primarily the market sector. On one hand rising interest rates will place more pressure on future buyers to get moving to lock in a mortgage before the hike or future hikes occur; this increases the demand and raises prices. On the other side of the spectrum it could push prospective buyers to hold off and look towards renting; lowering the demand in the market and increasing overall housing, reducing prices.
There is no clear-cut way to predict whether housing prices will rise or fall overall in the long term. There are to many sociological, economic and political factors at play. But from a short-term perspective one can take advantage of monumental moves made by central banks in this instance the bank of Canada raising interest rates. For example, if you are an international buyer and plan to buy with US funds. Now is the time to dive in. At the time of writing this article the USD/CAD is valued at 1.31 after a rate hike the dollar is likely to take a moderate hit let’s say down to 1.25 also considering that Canada has made a NAFTA deal with the states. So, let’s say you are buying a you will have more CAD dollar for converting your USD than in the future. You would also be saving .25% in interest on the home. These differences may seem small but when you are dealing with larger number these things add up.