In Michael Babad’s report for The Globe and Mail
, Bank officials cautioned that the ongoing commotion in global stock, bond, and currency markets is just a preview of the turmoil that would ensue in Canadian housing should the British indeed choose to exit the European Union.
“If the ‘Leave’ side prevails in next week’s Brexit vote, as polls now suggest, global interest rates are likely to remain even lower for even longer amid the deep uncertainty over the U.K.’s and the EU’s economic fate and likely financial market volatility,” BMO chief economist Douglas Porter and senior economist Robert Kavcic stated.
The duo issued the warning in their latest report, which dealt with the various factors driving the out-of-control price increases in Vancouver and Toronto.
“In that event, the Fed will remain on ice even longer and Canadian rates will again probe all-time lows, keeping mortgage rates at an extremely low ebb and thus further fanning the flames in the domestic housing market,” Porter and Kavcic added.
Kavcic went on to explain that mortgage rates might be suppressed should Canadian government bond yields (such as the five-year fixed rate) follow global figures in a likely plunge post-Brexit.
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A “quit” vote by the British electorate on Thursday’s (June 23) Brexit referendum would only succeed in “further fanning the flames” in Canada’s red-hot housing markets, according to BMO Nesbitt Burns officials.