While The Governor of the Bank of Canada in his last public statements about interest rates drew our attention to the declining increases in rates – and suggested a 25 point increase was to be expected for December, the remedies did not succeed and the trend did not hold. The Bank increased by 50 basis points. Behind the scenes and around The Bank table the discussion about rate increases must have been intense. How much is too much?
This increase is surely designed to put a hold on consumer spending at the most wallet busting time of the year and keep up the downward pressure on the economy. It is committed to bringing the inflation rate to about 2% and with that achieved the 5yr mortgage rate is expected to settle on either side of 3.75%.
There is peril. As the rates go up, the vessel of the Canadian economy – the economic submarine -goes into the pressure-filled depths. The Governor of the Bank is giving the commands to descend further and the sweat on the brow of all the sub-mariners is dripping. If the rate goes too high – and the vessel goes too deep – implosion! I’m sensing a new level of fear on the economic ship and in the real estate marketplace and maybe that’s just what is required to turn it all around.
Would I buy a house now? Absolutely I would, with certain measures in place. All big picture metrics and all the wild cards remain the same for Toronto and most of Ontario. Would I sell? I’d prefer to hold – but that statement is not equal across markets nor circumstances and requires a full discussion.