The news of Toronto’s strong housing market came the same day that the Bank of Canada announced a 0.5 percentage point decrease in interest rates, in response to a global slowdown caused by the coronavirus.
Variable-rate mortgages are linked to the Bank of Canada’s key lending rate, and lenders tend to adjust their mortgage rates in step with the BoC’s changes.
Canadian fixed-rate mortgages are more closely linked to interest rates on U.S. government debt. Those rates hit all-time lows in recent days, meaning fixed-rate mortgage borrowers will likely see lower rates as well.
Market experts say that move could accelerate house prices even further, as lower mortgage rates give homebuyers more buying power.
“Everyone knows exactly what happens in the near term if mortgage rates plunge ― that’s just more kerosene on the fire,” Rob McLister, founder of mortgage comparison site Ratespy.com, told BNN Bloomberg.
“All of this is great news for housing and the mortgage market ― until and unless we see a huge spike in coronavirus cases in Canada and/or a big jump in unemployment,” he added.