Kevin Lau, a Toronto-based technology consultant, says he can’t wait to take advantage of the lowest mortgage rates in Canadian history to buy a second condominium and rent his current home.
Lau, 28, plans to get another mortgage and refinance his C$160,000 ($157,000) home loan after Bank of Montreal, Toronto- Dominion Bank and Royal Bank of Canada (RY) cut borrowing costs last week.
“It’s always tempting when the credit is available at much lower rates than they ever have been,” Lau said. “The fact that house prices have been going up and continue to go up much faster, you need to really take advantage of it.”
Banks are competing to offer mortgages at rates as low as 2.99 percent as their funding costs drop on investor demand for the relative safety of Canadian bonds amid Europe’s fiscal crisis. That’s fueling real estate purchases, potentially inflating a housing bubble and adding to recordInternational Monetary Fund says poses a risk to the nation’s economy. household debt, which the
“It could increase the housing bubble,” said Sheryl King, head of Canadian economics at Bank of America Corp., who estimates the country’s housing prices are overvalued by about 10 percent. “The lower interest rates are, the more speculative demand you will have in the market.”
With buyer psychology like this, it's a good thing the Feds are "watching the housing market closely. Cause we would hate to see a housing bubble in Canada!