This morning, the Bank of Canada left its Key Overnight Lending rate unchanged at 0.75%, amid prior speculation from many industry experts that the Bank would be dropping mortgage rates further to offset the impact of lower oil prices. The good news is that oil prices appear to have stabilized, and the Central Bank is suggesting that the worst is now behind us. The Bank had expected to see the effect of lower oil prices lasting well into 2015, however, we saw the impact of these lower oil prices being very front loaded, and the Bank is now forecasting very limited further effects of oil prices on the Canadian Economy.
What does this mean for the Albertan Homeowner/Prospective Homeowner?
In terms of interest rates, nothing has changed -so most people shouldn’t expect to see any sort of reduction in their variable rate mortgage rates, and/or payments. Today’s announcement signals something a little more important though; if the effect of lower oil has already been felt in Canada, the predicted drop in real estate values in Edmonton may not come to fruition. The first quarter of 2015 saw modest price decreases in Calgary, while prices actually managed to go up in Edmonton compared to the same period in 2014. For those homeowners sitting on the fence waiting for prices to drop, that time may have passed.
For existing homeowners, the announcement is welcome news, since it means that they shouldn’t fear a major drop in the value of their homes. For prospective homeowners, the Bank’s announcement could be viewed as an indication to start actively looking -since prices aren’t expected to drop any further. As the sellers in the market begin to realize that property values are not dropping, the market could switch from being in favor of the Buyer today, to being balanced or even potentially shifting to being the type of Seller’s market experienced in Edmonton during various periods over the past decade.