How Coronavirus is Affecting the Real Estate Market

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It’s hard to pick up a newspaper these days and not read about Coronavirus (otherwise known as COVID-19). What began as a few cases of pneumonia at the end of last year is spreading quickly all over the world. There are now over 100,000 cases worldwide and over 3,000 deaths with no end in sight.

While Coronavirus is certainly a health issue, it’s also an economic issue. Just last week, the Federal Reserve did an emergency interest rate cut of 0.50%, with the Bank of Canada matching it.

With the spring real estate market once again upon us, that begs the question, how will Coronavirus affect the real estate market? Read on to find out.


The Bank of Canada Cuts Interest Rates

Our central bank had a plan. It wanted to steadily increase interest rates, but then Coronavirus happened. Instead of raising interest rates, the Bank of Canada cut interest rates.

On Wednesday, March 4th the Bank of Canada cut interest rates by 0.50%. To put this into perspective, this represents the single biggest interest rate cut since the financial crisis in the late 2000’s.

The Bank of Canada had no choice but to cut interest rates. It was following in the footsteps of the Federal Reserve in the U.S. After the Federal Reserve cut interest rates by 0.50% on Tuesday, March 3rd, the Bank of Canada cut interest rates the very next day.

Our Bank Governor wasn’t shy about admitting why he cut interest rates. He said it was due to Coronavirus. He also said he isn’t afraid to cut interest rates again if the Coronavirus situation doesn’t improve soon.


What Does the BoC’s Interest Rate Cut Mean for Mortgage Rates?

While the Bank of Canada cutting interest rates certainly influences mortgage rates, just because our central bank cut interest rates by 0.50%, doesn’t mean mortgage rates will fall by 0.50%.

Many of us were anxiously waiting to see what the banks would do. Would the banks pass along the full rate cut to those with variable rate mortgages or would it pocket some and only pass part of the savings?

Luckily the banks did the right thing and passed along the full rate cut to consumers. On Thursday the banks announced that they would be cutting prime rate by 0.50% to match the Bank of Canada’s interest rate cut. This is good news for anyone with a variable rate mortgage.

If you have a fixed rate mortgage your rate is fixed, so you aren’t affected. That being said, if you’re in the market for a property, the good news is that fixed rate mortgage rates have dropped further. If you’re a borrower with a decent credit score, it’s not hard to find a mortgage rate under 3% these days.

With Coronavirus showing no signs of slowing down, could we see mortgage rates dip further? Only time will tell. With the spring real estate market almost upon us, lower rates seem likely.


What Does This Means for the Real Estate Market?

Mortgage rates are one of the key drivers of the real estate market. With a new more lenient stress test coming into effect for those putting less than 20 percent down coupled with lower mortgage rates, expect a busy spring real estate market this year.

If you’re on the fence about buying a home, now would be a good time to buy. It’s hard to say how long mortgage rates will stay this low.

Written by Sean Cooper Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. Sean’s helping others with their mortgages as an independent mortgage broker. Get in touch with him for all your mortgage needs. For a free mortgage consultation, email or call 647–867–3711.