In one week the governor of the Bank of Canada (BOC), Stephen Poloz, is due to release the Interest Rate Announcement and Monetary Policy Report. Until a few weeks ago, it seemed unlikely that the rate would be adjusted – but now with Greece teetering on the edge of insolvency, the Chinese stock market collapsing, and strong hints (from Bank of America and TD Economics and others) warning Canada is already in a recession – so it seems possible that the BOC will trim it’s overnight rate again next week.
The BOC last dropped the overnight rate by 0.25% on January 21st 2015. The lenders absorbed some of the rate drop for themselves, passing on a 0.15% variable rate drop on to mortgage borrowers. In order to remain competitive, fixed rate mortgage rates have also dropped – although there is gentle upwards pressure building in the international bond market (which is how fixed rate mortgages are financed).
Of course, there’s only so much money that people can afford to spend on a mortgage – so could another drop in variable mortgage rates really affect Victoria property sales volumes and prices? Are property buyers already “tapped out” and cannot afford any more? What do you think?