The Bank of Canada has softened their stance on future overnight lending rates after their announcement to leave the current short term lending rate steady at 1%. Citing concerns over global economic uncertainty, and also growing unrest in Canadian personal debt levels, any future changes have been put on the back burners. The Bank was adamant a future rate hike was not on the radar.
The primary concerns of global uncertainty, particularly around the Eurozone was heightened with the continued increase in personal debt level ratios in Canada. The rise of cheap money has many Canadians buying the largest purchases they can make — homes. With higher debt to income ratios as a result of cheap money, many Canadians, perhaps in excess of 10% of homeowners, could be faced with significant financial problems in the event of a rate hike.
The housing market is showing signs of constraint particularly in the condo markets of Vancouver and Toronto. Foreign investors are pulling out, as well domestic demand has tapered off. That doesn’t mean every market has acted the same. In fact, Alberta continues their hot pace bucking national trends even with the changes to mortgage rules in July.
It’s unlikely the market itself will ‘overheat’ but there will be pockets of higher sales, Alberta for example, whereas other parts of the country may show signs of ‘bubbles’ at the same time.