The Bank of Canada is in a state of uncertainty concerning the impact the new federal mortgage rules will have on the housing sector, a standpoint that questions the next step which should be taken by the central bank.
Derek Holt, an economist at Scotiabank, contended Governor Stephen Poloz’s statement which he made, revealing that the Bank of Canada is in for lower rates, as it won’t cause trouble in the housing market in advance.
Derek penned down in a report; “What the BoC may be implicitly assuming is that the rate sensitivity of the mortgage book has been dropped to around zero in the wake of the tightened mortgage rules.”
Additional to that, he said; “Therefore, if they cut the easier monetary policy, conditions won’t be transmitted to mortgage borrowers. Rates matter to the currency. They likely also still matter to the mortgage book.”
The standpoint for BoC “should be viewed as dovish, not hawkish” added Charl St-Arnaud of Nomura Global Economic, adding that any motivating fact to the economy of Canada will be formed not by cutting rate, but rather through a fiscal course of action. Nick Exarhos, on the other hand, warned that “further policy easing” might just be right around the corner.
Nick commented that the measures related to housing were said to ‘mitigate risks’ to the financial system, while at the same time posing a risk to growth. As a result, the Bank has now altered its view on what housing risks mean for the rate outlook, with greater attention paid to growth implications rather than financial stability.”
For the meantime, any major real estate adjustment will cause a rate cut to decline by 0.25 per cent in the upcoming year. David Doyle said; “Rhetoric suggests more stimulus is on the table. Doyle agreed with the likelihood of rate cuts during the same time of the housing correction, going over his previous forecast of the central bank keeping rates stabilized till 2019.