BoC rate cut is 'fuel for fire' for mortgage industry: Mortgage expert
The Bank of Canada’s decision to cut its benchmark interest rate Wednesday will further fuel the country’s housing markets, according to one expert.
“It’s going to be an unexpected blockbuster year in the mortgage market – at least until and unless we see a serious breakdown in the economy, ” Rob McLister, founder of mortgage comparison website RateSpy.com, told BNN Bloomberg in a television interview. “If you start seeing unemployment tick half a point higher, then all bets are off on the mortgage outlook this year.”
“But for the foreseeable future, these unbelievably low rates are adding a lot of fuel to the fire in the housing market.”
Chartered banks typically follow the central bank’s lead when it comes to adjusting their prime rate, albeit not always passing along the full benefit of cuts. The prime rate is used to help determine interest rates on various loans, including variable-rate mortgages.
McLister said that even with the Bank of Canada’s decision, the country’s lenders won’t be rushing to slash their mortgage rates.
“They generally don’t cut mortgage rates significantly during market volatility,” he said. “It’s highly likely rates will come down a bit in the short-term. But we might have to wait. Banks might keep some powder dry. They’re taking a hit with falling rates and an inverted yield curve.”
“We’ll have to wait and see.”