Low interest rates are continuing to fuel a hot housing market

[projekktor id=’20004′]

While the low interest rate could boost the economy for now, experts say it’s important to keep in mind that these rates won’t last forever. So keeping household debt levels in check is key.

Yesterday the chief executive from Royal LePage was hoping that the Bank of Canada would not reduce interest rates any further because it would give people an added incentive to join the already hot housing market, especially in cities like Toronto, Vancouver and Hamilton. Other realtors believe the opposite.

The Bank of Canada hopes the latest cuts will stimulate a slightly tired Canadian economy, specifically in the business sector.

Marvin Ryder from the DeGroote School of Business says “take this opportunity to expand a plan add some workers, buy some more inventory, what we call working capital.”

To everyday people, the drop also offers a chance to catch up on piling debt.

“You’re going to have some debt relief, you can actually put more towards your principle and that’s what i tell people is the best thing to do”

TD Bank says it wouldn’t match the 25 basis point drop by the Bank of Canada, and dropped it’s lending rate by only 10, not giving people much more lending flexibility.

“I really don’t think the ten basis points will make a very big difference to everyday people, that’s not going to be enough to buy a house or buy a car” Ryder adds.

Try telling that to Phil Soper, Chief Executive of real estate giant Royal LePage.

Soper released a report saying that the average price of a home in this country increased between 3.9 and 7.5 % and in Hamilton, over 11% from a year ago.

Soper is worried that further interest rates cuts would overwhelm the industry. However, Doug Tunis, branch manager in Ancaster believes the drop won’t have much of an affect on the already hot market.

“I don’t think the drop will be an impact on whether the market will change right now seeing that it’s so minimal, I still think the strength and the sturdiness of the market will stay where it is.”

While the low interest rate may make borrowing more attractive, an economist with TD Bank is reminding people that what goes down, must come up eventually.

“We expect the economy to pick up in the 2nd half of the year and into 2016 along side the US economy. You have to live within your boundaries. You have to know what your financial situation is and you have to work with that.”

The interest rate drop also lowered the value of the Canadian dollar down to 77 cents US making travel south of the border ever more expensive. For instance, a $60 meal in the States would run you just under $80 Canadian.