Tuesday, July 20, 2010

Well they did it...

Carney took a strong laxative and was able to squeeze out another 0.25%.
Now how will this affect housing? I think it will be a push. Rates are still low and in fact by raising short rates, long rates may stabilise as bond-holders buy into the B of C's inflation fighting rhetoric.
Though of course we are still, at 0.75%, well below the inflation rate.
So variable mortgages should go up, but fixed, long mortgages should stay around where they are now.
What happened in the US as Greenspan raised rates 16 X! (after telling folks to go short and variable in their mortgages - a criminal act IMVHO) was that the buyers were so marginal that they could not afford the increased variable rates or the leap to a fixed when their annual renewal came up.
We will have to see how strong the Canadian buyers are. In any case the message is out..rates are a movin' up.
Just got back from a short trip to the Gulf Islands. Talk about D-E-N-I-A-L. Some of these Islands have seen the complete disappearance of recreational and US buyers at the same time. Many properties have been on the market for...wait for it...three years and are getting shabby..
Unfortunately sellers are looking in the rear-view mirror for their price points and are very slowly following the market down. Instead of taking a good chunk off the price...like one place on Pender which sliced and diced from $1.78 to 990K and just got sold (don't know the price)
Of course the higher ferry prices are probably adding to the woes. Couple of hundred bucks for a family and car to go and come back to most of these places.