U.S Fed Rate Climb Causes An Uneasiness In The Mortgage Markets
A campaign by the United States president-elect, Donald Trump assured the American public of $1 trillion in new expenditure without increasing the taxes.
This has caused fears of inflation and a likely possibility of interest rates being increased the Federal Reserve Chair Janet Yellen due to the bond and mortgage markets.
Don Pittis cautioned in a write-up by The Globe and Mail, that the impact of the climb will have a slower effect on the housing sector than the bond markets, however, both sectors will definitely feel the hit of a Fed hike.
Pettis wrote; “Slowing house prices and falling bond prices have the same trigger. [Everything] else being equal, rising interest rates would eventually have the same effect on houses that it has already had on bonds. Higher rates make existing assets fall in value. In both cases, there will be large effects on the wider economy as asset values disappear. If that happens in the property market, Canadians will not like the feeling.”
He further argued that a large amount of Canadian are not into the business of purchasing homes, they’ll rather leave it vacant to acquire more profit in the long run. Additional to that, the analyst said Canadians do not deem houses as investment assets, they prefer to see it as a place of inhabitant and where one can raise a family.
He explained; “Housing markets are fractured, dependent on human values and decisions that don’t fit into bond tables. The president-elect may not care how Canadians feel. But the global bond industry with its traditional headquarters in the U.S. has enormous clout in Washington.”