Interest Rates Could Rise Faster, With New Stimulus Plan From Trudeau

Until recently, with Oil prices dropping precipitously and the economy lagging, the general consensus was that interest rates would stay low for a prolonged period. With the planned stimulus spending package from our Prime Minister Elect and the Federal Liberals, this could change. It's become increasingly clear that we need a national strategy to move away from the commodity based economy Canada has been for so long, as oil prices languish at these levels and the Liberals have tabled such a plan. 

The good news is that this strategy should bolster the economy and add further support for real estate prices, including Income and Investment properties with the landlord renovation stimulus, expanded real estate construction and provide the much needed stimulus we need in Canada and in turn bolster the job market. However, if the economy does strengthen as planned, then we could see an increase to interest rates. 

A Recent Report From CREW suggest this is the case, the report read--

"Interest rates could rise sooner under the new Trudeau government if spending plans have the desired effect on the Canadian economy. Economists have been crunching the numbers following the Liberal victory Monday and believe that the $10 billion boost to the economy through the planned infrastructure program and other measures could mean that the Bank of Canada would be ready to hike rates as economic conditions improve. That raises concern over higher mortgage payments and the debt-income ratio in households.

Some of Canada’s largest mortgage lenders are among those predicting the gains for the economy from federal spending plans; TD economists suggest a 0.1 to 0.3 per cent positive impact on GDP; BMO is predicting 0.5 per cent with overall growth for 2016 of 2.5 per cent." CREW Report by Steve Randall 
 

Though increasing interest rates is a concern the strengthening economy and further support to real estate would be great news, so the take away is as always be careful with your debt levels, take advantage of these low interest rates and be sure to discuss your mortgage options with myself and your mortgage experts.

 

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Sabbir Chawala

Sabbir Chawala

Broker/Owner
CENTURY 21 Innovative Realty Inc., Brokerage*
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