Bank of Canada Drops Rate


"The Bank of Canada announced a surprise quarter-percentage-point cut to its key interest rate Wednesday - a move it calls "insurance" against the potentially destructive effects of the oil price collapse.

The reduction in the bank's overnight rate to 0.75 per cent from 1 per cent - its first move since September, 2010 - comes as a precipitous drop in the price of crude slams Canada's oil-dependent economy."

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Effectively this should change the bank prime rate to 2.75% (0.75% + 2).

What does this mean for your property or Real Estate Investments?

In my opinion at the present moment this rate cut is a precautionary measure to protect against any "falls from the sky." The current Toronto Real Estate Market is experiencing a lack of inventory especially in single homes and freehold properties. The condo market is also experiencing a balanced market with some opportunities for investment.

With the current news we expect the rental market to be busy as some people may decide not to buy and some may sell. In addition we expect overseas investors especially from the US and Europe coming back to purchase investment properties.

Don't Make Hasty Decisions

In 2007/2008 many families and Individuals made hasty decisions and tried to time the market by selling their principal residences and investments. Within 8 months the market bounced back and those individuals/families have had a hard time to get back into the market.

If you are on a variable rate! Congrats- You will be saving money. However I suggest you use the discount to pay off your mortgage faster by keeping your payment amount the same as always. In fact double up as much as you can and try to pay off your mortgage faster.

Sherif Nathoo

Sherif Nathoo

Sales Representative
CENTURY 21 Leading Edge Realty Inc., Brokerage*
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