23
Bank of Canada Cuts by 50 Basis Points to ‘Stick the Landing’
(finance.yahoo.com)
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this post was submitted on 23 Oct 2024
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While I like the idea of a lower interest rate, I also wonder what it will do. Will it drive housing prices up? Will it stimulate the economy by encouraging people to take debts and loans?
Did they lower rates to encourage people to take out loans?
Yes. Many people budget the most they can afford in mortgage payments to identify how much to pay for a home. Lower interest rates -> lower mortgage payments per $100K -> more money they can offer for the house -> house prices go up.
Not just "people", either. Interest rates are the main cost of expanding business activity. Lower interest rates means it's cheaper to start or expand a business.
Yes. Borrowing $100K just became $500 cheaper for each year the loan is held. With interest compounding over time, this has a much bigger impact the longer the term of the loan (mortgages and business loans are the biggest and longest, generally).
Yes, yes, kinda yes.
It always drive prices higher.
Always is a strong statement but yeah thays how it generally collerates
We're in an era where corporations are buying housing at an unprecedented rate.
They have deep pockets, so even though the people holding mortgage will see relief, we will also see more housing bought by corporations.
The normal person cannot compete with the corporations, and they will have to either outbid the corporation, or hope that the seller find their storing touching and sell them the house even if the bid is lower.
So yeah, prices will raise for sure.