Daily Market Update

BoC cuts rate; when will mortgage rates follow?
Yesterday’s interest rate cut by the Bank of Canada was not widely expected and has not been universally welcomed, but it’s certainly got everyone talking. As soon as the announcement was made the speculation began as to what impact the cut would have on the housing market. Low interest rates are one of the driving factors behind the high levels of sales and prices over the last year, but will the cut to 0.75 per cent drive more sales or increase consumer caution? For some, the BoC’s move will be taken as a sign to be prepared for leaner times ahead; however, for others it will tip the balance in favour of buying a home now rather than waiting for the return of higher rates. Speculation is well underway as to when lenders will begin to cut their mortgage rates, and how low they will go. The likely scenario is for variable home loans to mirror the 0.25 per cent cut and for fixed rate deals to also drop due to their link to the bond market which will also be lower. Analysts believe that the lenders will be quick to seize on the opportunity and that mortgage rate cuts will be announced within days. As for future interest rate moves; some economists are already talking about another cut in March.
Shadow lenders gaining ground but is it a bad thing?
While the low interest rates will be good news for many homebuyers, for those that are not able to obtain a mortgage through traditional lenders the ‘shadow’ banking sector is an increasingly popular choice. Last year the Bank of Canada warned that unregulated lenders are a risk due to the lack of regulation and the high rates of interest they charge, sometimes as high as 20 per cent. However, not everyone agrees that the non-bank lenders pose a problem; Jim Murphy, chief executive officer of the Canadian Association of Accredited Mortgage Professionals told Bloomberg that they play an important role in the market and that some of the lenders are very good at what they do. Meanwhile, CIBC economist Benjamin Tal said that with home loans from the shadow lenders growing by 25 per cent a year there may need to be more involvement from the regulators to mitigate the risk. Read the full story.
Think Canada’s expensive? Try Venezuela
Almost anywhere in the world the local population will say that the cost of living is too high, but a new ranking shows that Canada is not even in the top 15 most expensive places to live. The data from Movehub, a site for those considering emigrating, shows that Switzerland, Norway and Venezuela are the three most expensive countries to live in. The figures are based on the cost of consumer goods, but not mortgage or rent payments. Many of the most expensive countries are in Europe, including Belgium, the UK and France, or in Asia-Pacific, including Australia and Singapore. North America comes out better with both Canada and the U.S. outside the top 15. 

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