The silver lining for home buyers in 2020 will be a relatively inexpensive cost of borrowing, as it’s highly unlikely the Bank of Canada will usher in a rate hike anytime soon. The national bank kept its trend-setting Overnight Lending Rate at 1.75 per cent throughout 2019, allowing consumer lenders to keep their variable mortgage rates competitively priced, and yields in the bond market low, which impact the pricing of fixed mortgages.
The BoC has indicated it plans to hold status quo this year as well, barring any unforeseen economic upset – and in that case, a cut would be in the cards, rather than a hike.
Overall, the BoC will take the same cautious stance it did in 2019; economic factors at home and abroad aren’t quite strong enough to warrant higher interest rates but are stable enough to prevent a rate cut. Avoiding a cut also leaves some wiggle room in case global trade and recession risks do materialize and the BoC needs to act.
Tension over U.S.-China trade relations, as well as growing unease in the Middle East, in particular, will inform the BoC’s careful approach.
Finally, there may also be relief on the way for those who continue to have their affordability hampered by the stress test. In a mandate to the federal Department of Finance, the Prime Minister’s Office has implored the finance minister to explore making the test more “dynamic”.
While it’s not certain what form these changes could take, there’s speculation that its higher-interest qualification hurdle could be reduced, or perhaps adjusted for borrowers with good credit. As well, they could remove the current requirement for borrowers to be re-stress tested when switching lenders, a measure that has drawn heavy criticism from the mortgage industry for discouraging consumer empowerment and competitiveness.
In all, it’s already shaping up to be a busy year for the real estate industry, and it will be interesting to see how growth clocks in within Canada’s major markets as the first year of a new decade unfolds.
Excerpt taken from article “2020 forecast: Hot sales growth and a chilled stress test” hy Penelope Graham, REM Magazine.
Need a mortgage? Call me. Steven Porter is a Licensed mortgage agent with Mortgage Architects, mortgage broker. For advice and service contact Steven Porter, Accredited Buyer Representative, Seniors Real Estate Specialist, Certified Luxury Home Mortgage Advisor and Certified Reverse Mortgage Specialist at 905-875-2582, steven@1800Mortgages.ca. www.1800Mortgages.ca