Stephen Poloz: Once-hot housing markets 'back to normal'
Bank of Canada governor Stephen Poloz said Wednesday’s decision to slash the central bank’s benchmark interest rate was an effort to stabilize the country’s housing markets amid growing fears of the spread of COVID-19.
“If consumer confidence will erode because of the virus then you’d expect to see a downdraft in housing,” Poloz told BNN Bloomberg’s Amanda Lang in an exclusive interview on Thursday. “The interest rate move this week is intended to address exactly that. It should help stabilize housing instead of pour extra fuel on a hot housing market.”
The Bank of Canada cut its key interest rate by 50 basis points on Wednesday to 1.25 per cent. In turn, Canada’s Big Five banks slashed prime lending rates that same evening by the same margin, affecting the rates on certain loans and mortgages backed by the individual institutions.
Poloz says that the country’s housing markets have normalized after coming down from its 2018 peaks, thanks in part to new mortgage rules.
“Housing, of course, grew really fast. It recovered quickly during 2019, but as we got into the final months of 2019, that kind of levelled out at a new space,” Poloz said. “I know that resales lately have seemed quite strong year-over-year, but that’s because it was so weak a year ago.”
“I think, in terms of levels, we’re kind of back to normal having absorbed the changes to B-20 and the higher levels of interest rates, et cetera.”