Interest rate cut could give slumping Calgary housing market a boost

Lower interest rates could provide a boost for Calgary’s slumping resale housing market.

The BMO Home Buying Report, released on Friday, said 62 per cent of Calgarians are planning to purchase a home within the next five years and 16 per cent said the recent decrease in interest rates will allow them to afford a home sooner than anticipated.

The report also said 52 per cent of Albertans are planning to purchase a property within the next five years.

Laura Parsons, mortgage expert with BMO Bank of Montreal, said lower interest rates could boost housing activity.

“Overall the interest rates how much they’ve gone down it’s going to lower their (mortgage) payments,” she said. “The survey clearly says there’s people that are out there that are looking to buy and it’s going to nudge some of them. These rates aren’t going to stay this low for that long . . . I can’t see it not being somewhat of an inspiration for those people outside looking to get into homeownership.

“These months are traditionally slow anyway but I think this is going to be a really good nudge for some of those people and remember too for some of the people who have outside debt that have a home and have some equity this also too will mean maybe they can reduce some of their interest costs by re-writing and collaborating into a mortgage product.”

Just this week BMO dropped its five-year variable mortgage from three per cent to 2.85 per cent.

“Homeownership is still better than renting and with these rates and the (mortgage) payments that probably will actually end up being lower than a standard rental,” added Parsons.

Calgary’s resale housing market has taken a beating in January. So far this month up to Thursday, there have been only 793 MLS sales in the city, down 37.3 per cent from the same period last year. New listings have risen by 43.6 per cent to 3,082 while active listings are up by a staggering 89 per cent to 4,710. The average MLS sale price has dropped by 0.08 per cent to $461,637 while the median price of $422,000 is up by 1.69 per cent.

The BMO report also found that: 47 per cent of Calgary residents (34 per cent in Alberta) feel the lower interest rates will have a positive impact on their overall financial situation; 35 per cent of Calgarians (34 per cent Albertans) say they are now more likely to pay off their current debts, while only 13 per cent (Albertans) and 18 per cent (Calgary residents) will be influenced to take on more; 47 per cent of Calgary residents (62 per cent Albertans) said the change will have no impact on their plans to buy a property.

Sal Guatieri, senior economist with BMO Capital Markets, said that low rates will support activity in the housing market and improve affordability in Canada’s hotter urban markets.

“Given the negative impact of lower oil prices on the Canadian economy, interest rates are likely to remain low for some time, supporting home sales – especially in Vancouver and Toronto where affordability is an issue,” he said.

– Calgary Herald

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