Canadian Banks Ratcheting Down Mortgage Rates

Up until now, mortgage rates have been steady, even with the Bank of Canada lowering the bank rate by 1.50 percent over the last few months with lower rates expected to follow on December 9th. Banks have been holding on to their funds as write-offs relating to lower markets and US mortgage related holdings have hurt their ability to follow suit and lower rates.

Over the last week, Canadian banks have been able to raise some more capital through preferred shares and are comfortable with their balance sheets. As such, I noticed that Bank of Montreal and Royal Bank of Canada lowered mortgage rates with BMO offering a 5 year fixed rate at 4.99% and Royal Bank offering a 4 year fixed at 4.89%.

The lowering of rates will help buyers as they can now qualify for a larger mortgage and allow other buyers to enter the housing market for the first time. With the glut of inventory available, the lowering of rates will be a welcomed sign from a multitude of home sellers as inventories may start to deplete as the affordability will bring more buyers into the system.

What are your thoughts? Do you believe that the lowering of rates will help the Canadian housing market or are we in for a long drawn out downturn?

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