What do low rates mean for a potential housing bubble?

by Justin da Rosa04 Feb 2015
Finance Minister Joe Oliver has assured Canadians there is no housing bubble developing, despite record low interest rates that may entice some buyers to purchase more home than they can likely afford.
“I’ve said again and again we don’t think there’s a bubble – the Bank of Canada agrees with that, CMHC (Canadian Mortgage and Housing Corp), OECD (Organization for Economic Cooperation and Development),” Finance Minister Oliver told reporters last week, according to the Financial Post. ““We’re, of course, monitoring the market. It’s not a huge concern at this point.”
Oliver has held an optimistic view of the housing market and its future since he took office in March of last year, and last summer, when a number of lenders dropped their five-year fixed rates, Oliver voiced his opinion that it is not up to the government to oversee interest rates.
“I don’t think it’s the role of government to set interest rates or rates for mortgages,” he told Business News Network in Mid-June. “The rates are quite low and they’ve been coming down but a very small amount.”
He also noted at the time that the market was healthy.
Interest rates have been a hot topic since the Bank of Canada slashed its overnight rate by one-quarter of one percentage point to ¾ per cent on January 21.
Several of the big banks followed by slashing their own prime rates and also offering special-priced fixed mortgage rates on various products. 

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