Industry Impacts of a Canadian Housing Bubble
The fear of a housing bubble has been renewed in Canada, as the drop in oil prices in recent months prompted a surprise interest-rate cut by the central bank in January. As expected, the country’s big banks have reduced their prime rates, which are tied to home-equity lines of credit and variable-rate mortgages, but did not fully pass on the Bank of Canada’s 25-percentage point cut. Coupled with home prices that continue to grow, lower rates could encourage borrowers to continue entering the market, ahead of the spring home-buying season in the coming months. Once again, the cooling housing market is gaining some steam.
Analysts and policymakers have debated whether or not Canada is following in the footsteps of the American housing crisis that precipitated the 2007 to 2009 recession. Rising house prices encourage speculators to enter the market, which typically…
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