Photo: Nick Page/Flickr
The UK has voted to leave the European Union, and ripples from the Brexit referendum decision might also affect interest rates and, by extension, the Canadian housing market, some experts say.
“I think it’s just one more reason for interest rates to remain low,” says Pamela Alexander, CEO at the Ontario-Atlantic Canada division of real estate franchise REMAX.
“There’s a lot of turmoil going on in the world and a lot of economies that are still challenged, and I think it’s just going to prolong the period of low interest rates — and low interest rates are, of course, very good for the housing market,” she tells BuzzBuzzHome News.
Alexander’s opinion is in line with commentary describing the result of a leave vote that two BMO economists published prior to the historic referendum.
“The Fed will remain on ice even longer and Canadian rates will again probe all-time lows, keeping mortgage rates at an extremely low ebb, and thus further fanning the flames in the domestic housing market,” wrote Douglas Porter, the bank’s chief economist, and senior economist Robert Kavcic.
The reason for this, they argue, is because it creates “deep uncertainty over the UK’s and the EU’s economic fate.”
Already, stock markets around the world have tumbled and some economists say Brexit will lead to a recession in the UK, reports The Guardian. Earlier today, British Prime Minister David Cameron announced he was resigning.
In an interview, Royce Mendes, an economist with CIBC, says Brexit has no “direct implications” for the Canadian housing market in the near term, but there’s a caveat.
“If there were some global economic ramifications, unforeseen economic ramifications, and policy easing needed to be undertaken in various countries that could lower interest rates and have an affect on the borrowing rate for houses in this country,” he explains.
“However, that’s a real stretch there,” Mendes says.