10 November 2010
“With today’s very low possibility of sharp mortgage rates increase or a relapse into recession, we’ll hardly see any substantial price correction”, – the economists say.
In the same time, they believe Canadians would have certain problems with a sudden 3% hike in mortgage rates. It can lower affordability and, of course, demand and home prices.
The risk, though, is not so great, they say because the normalization of interest rates will take several years. Till that time Canadian rates can rise by 2-3%. Theoretically, the incomes should catch up with prices as well.
One of the more important worries can be prolonged low interest rates – they “may add fuel to the housing market once again and provoke a true bubble burst, when the rates normalize”.