The Bank of Canada’s benchmark interest rate is a quarter point above its record low primarily because the economy is weak. But there is another reason. Counterintuitively, the central bank says lower interest rates are necessary to reduce the risk of a housing bust. As thousands of suddenly unemployed energy workers seek new jobs, they will be able to do so without worrying about a spike in the cost of their mortgages.
Is it working? Seems so. National Bank this week said housing affordability stabilized in the first quarter, when mortgage payments on a typical Canadian home as a percentage of income increased by only 0.1 percentage points. In six of the 10 cities surveyed by the lender, the ratio declined, meaning it is getting easier for most Canadian homeowners to manage their mortgage payments. There’s never been a better time to buy a home in Calgary, at least for those who still have jobs. In Montreal, affordability is the best in a decade.
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