Interest rates & the housing market

by Contributed - Story: 74397
Apr 27, 2012 / 5:00 am

Recently I overheard a conversation regarding projected interest rate hikes for mortgage lending. The result was an anxious homeowner that became uncomfortable with the thought of interest rates increasing 1-2%.

I would imagine that this is a topical conversation in many households across the country as we hope and wish for the economy to improve. The comment on interest rate hikes came from a bank source who was advising their client on the appropriate lending solution for their needs and the suggestion was that interest rates would start increasing this year and that in 2012 we would have seen an approximate 1.25% rate hike from where we are today.

If that happens I’ll eat my hat!

I am not a bank employee and I have no interest in selling one financing product over another. I am a REALTOR(®) and business man who takes a keen interest in the economy. Whilst we have a finance minister who does not want to leave stimulus lending rates on the table for too long, we are nowhere near “too long” in my opinion.

The banks currently are making a very healthy spread on their borrowing and lending rates, their business model is working and the mortgage lending sector is very competitive leading to very positive opportunities for purchasers. Our economy IMHO is extremely fragile and a hike in rates in the next twelve months anything close to the order of 1.5% is going to give the banks a lot more than a lending headache.

While we should anticipate rate increases at some point, as I have indicated in the past, I don’t believe our housing sector is going to show any real head of steam until 2012 and even then, I would only anticipate seeing moderate gains in values. I doubt we will see more than one or two very moderate hikes in 2012. At that point, it is quite possible that you will see retail indices stumble as the belts get tightened once again in Canada (if there is anything left to tighten).

An optimistic outlook is important, and positive growth comes when people are optimistic, but to suggest we are already in strong recovery and in danger of having an overheated economy is more than foolish IMHO.

You may have to be on the look out for an edible hat for me, but I suspect we won’t see anything happen this year.

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About the author...

For the past twenty years Mark has been involved in real estate development and consulting and is currently a REALTOR with Realty Executives in Kelowna.

His column, brings a unique perspective on what may be important to us in the future as we come to grips with fast paced change in a world that few people barely recognize.

His influences come from the various travels he undertakes as an Adventurer, Philanthropist and Keynote Speaker. More information can be found on Mark at his website www.markjenningsbates.com

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.

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